When setting up a Special Purpose Vehicle (SPV) to use in the Producer Offset, you need to give some thought as to how you get the Offset out of the SPV to a relevant entity once it is paid. The Producers Offset comes back to the SPV in the form of a tax rebate, and as such there is no tax payable on it. The issue is how to get the rebate from the SPV to an entity where you can actually make use of the rebate.
One of the most common approaches is to use a loan agreement to the SPV, where the Producers Offset money can be used to repay these loans. As the loans are capital in nature, there is a smaller income tax impact. However, making loans can also have an impact on the amount of equity held in the film, and this impact needs to be considered when making the loans.
Checklist of issues:
- Have you got the correct entity structure in place?
- Are you using a holding entity to receive the Producer Offset from the SPV?
- Are you maximising the tax rebate to the correct entity?
- Have you created a correct loan agreement with appropriate dates, terms and interest
- Have you considered the equity in the film and the impact of loans or other agreements?
- Have you correctly planned for the tax impacts of the SPV?
It’s always good to plan ahead, but even if you commenced without carefully considering the effect of the Producers Offset, there are still opportunities to tidy things up.
Please contact us for a confidential discussion on how we can assist with your tax planning, so that we can assist you with receiving the Producers Offset and all the preparation that goes with it.