VAT in film co-production

We discuss another VAT interpretation of the relationship between a producer and a co-producer. The topic admittedly from the end of 2023, but in our opinion worth mentioning.

As a law firm, we advise film producers at all stages of production, and help arrange the relationship between the producer and the other entities that make up the financial structure of a production. In projects with dominant Polish participation, one of the most important problems to be solved is taxes. Particularly important is how to treat the flows between the producer and co-producers. The perennial dilemma boils down to the question of whether such a business relationship should be framed as (1) a joint business venture akin to a consortium or, however, as (2) a mutual provision of services between a producer and a co-producer, where the co-producer makes a production contribution, receiving in return a share of the economic copyright in the audiovisual work and sometimes also in contributory works such as a screenplay. Approach (1) basically means no value-added tax, while approach (2) leads to the opposite conclusion. The safer VAT approach prevails in the industry, but for various reasons a non-VAT solution can be advantageous. The sparse tax interpretations and sparse case law don’t make things any easier either, because as in life we have interpretations like this and we have interpretations to the contrary. How to live then?

With help comes a tax interpretation dated 23.10.2023 No. 0113-KDIPT1-2.4012.567.2023.2.KW, in which we find an extremely comprehensive and detailed description of the planned film production. Contrary to the position of the producer and the co-producer, the tax authority considered it a business cooperation, in which the services of both parties are subject to VAT, and each entity should issue an invoice. It is worth reading the justification, where numerous previous rulings are cited.

From our legal and tax perspective, the aforementioned interpretation points to one basic practical conclusion: even the smallest details in the producer-manufacturer relationship can affect what qualification the tax authorities will adopt, and if we already decide to apply for a tax interpretation, every detail we provide about the planned project can determine the direction of the issued ruling.