EC greenlights U.K. tax credits for filmmakers

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BRUSSELS -- The European Commission on Wednesday gave the green light to the U.K. government's new tax credit system for filmmakers.

But the go-ahead came with the addition of a more rigorous qualifying cultural test for producers looking to access the system of tax credits.

EU competition commissioner Neelie Kroes gave the tax credits an opt-out from the usual rules banning state aid because the British subsidies met strict conditions that allow governments to fund art and culture.

The system, which runs through March 2012, aims to provide filmmakers more tax credits on certain production costs than normal British tax rules allow.

EU rules ban state aid unless it meets strict EU conditions, including the promotion of culture. "As with other film support schemes which meet these conditions, we have been able to apply the cultural derogation to the general ban on state aid in the treaty," Kroes said.

The plan will give film production companies a cash payment of up to 25% of any tax loss on top of an extra tax deduction for pre-production, principal photography and post-production spending in the country. Films that are not produced with other European companies will have to pass a cultural test giving points for cultural content and cultural contribution.

The U.K. is due to soon draft a law launching the plan, with the cultural test in place. To pass the test, a film must obtain at least 16 of the maximum 31 points for different criteria.

A U.K. Government spokesman said the all-important cultural test guidelines are expected to be published Thursday.

Until then, most producers will have to wait and hope that proposed productions can pass such tests.

Leo Cendrowicz reported from Brussels. Stuart Kemp reported from London.
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