New grant scheme for film and TV production in New Zealand

The New Zealand Government has introduced a new financial incentive to encourage large-scale film and television production in New Zealand.

The Large Scale Screen Production Grant Scheme (the scheme) was launched on 1 July 2003, and allows eligible production companies to apply to the New Zealand Film Commission for a tax-free grant to refund 12.5% of qualifying New Zealand-based production expenditure on feature films, television movies and television drama.

Although minor details may change, we understand that the guidelines summarised in this newsletter will be approved by Government ministers by the end of November 2003. If you do have any questions or comments on these guidelines, we communicate regularly with ministry officials and can present these questions or comments on your behalf.

As well as advising on all legal aspects of your New Zealand production, Bell Gully can advise you on your eligibility for a grant and on the application process.

Minimum level of Qualifying New Zealand Production Expenditure

The key criteria for determining eligibility for the grant is whether the minimum level of QNZPE of $15 million has been met in the production of the project. The grant is calculated in relation to amounts that are net of Goods and Services Tax. In addition:

• where the value of the QNZPE ranges from $15 million to less than $50 million, the QNZPE must be at least 70 per cent of the project's total production expenditure (TPE);
  
  
• where the value of the QNZPE is $50 million or more, the project will qualify for the grant regardless of the percentage ratio of the QNZPE to the project's TPE; and
  
  
• for television series, individual episodes with a minimum QNZPE value of $500,000 per episode may be bundled to achieve the total value of $15 million within one financial year, up to a maximum of 26 episodes.

Eligible production companies

In addition to the requirement that the production company is a New Zealand resident company or a non-resident company with a permanent establishment in New Zealand, the production company must also:

• where the QNZPE is between $15 million and $50 million, be responsible for making or arranging the making of the project in its entirety worldwide; and
  
  
• where the QNZPE is $50 million or more, be responsible for all the activities involved in making the project in New Zealand.

Eligible projects

To be eligible for the grant, the project must be substantially completed after 1 July 2003 and either a feature film (including those shot direct to video), a television movie, a television drama series or a television drama mini-series for adult television or for children's television. Each of these formats is defined in the guidelines. The project must also be produced for exhibition to the public in cinemas, exhibition to the public by way of telecasting or for distribution to the public as a video recording. The scheme specifically excludes certain formats from eligibility for the grant.

Access to other incentives

A project that receives a grant will not be eligible for any other New Zealand Government film finance or tax incentives. Such incentives include early deductions under subpart EO of the Income Tax Act 1994 and funding from the New Zealand Film Commission, NZ On Air or Te Mangai Paho. However, the scheme does not restrict the project's eligibility for any development funding from the New Zealand Government. This criteria will be particularly significant for New Zealand projects as such projects will not be eligible for the grant if other New Zealand financial or tax incentives have been accessed, with the very limited exception of New Zealand Government development funding.

Qualifying New Zealand Production Expenditure

The QNZPE is those costs that are eligible for the grant and represents the production company's expenditure on the production of the project that is incurred for, or is reasonably attributable to the provision of goods and services in New Zealand, the use of New Zealand land or the use of goods that are located in New Zealand at the time they are used in the production of the project.

Total production expenditure

TPE is the base against which the 70 per cent minimum QNZPE is assessed for projects in the $15 million to $50 million QNZPE category. TPE is defined as the expenditure incurred in, or that is reasonably attributable to, making the project and includes pre and post-production activities and any other activities undertaken to bring the film up to the point where it is ready to be distributed, broadcast or exhibited to the general public. This does not include activities associated with developing the proposal, arranging or obtaining finance or distributing or promoting the project.

Applications

The scheme began on 1 July 2003 and production companies may apply at any time to the New Zealand Film Commission, which administers the Scheme, for an initial opinion of whether the project, and what proportion of the project's budgeted expenditure, is likely to meet the criteria for the grant.

Within three months of completion of the project (which is when the project could reasonably be considered to be ready for distribution, broadcast or exhibition to the general public), the company may submit an application for the grant. We can assist with these processes and advise on the information you will need to provide in applying for initial certification and for the grant.