Almost 40 years ago, director Francis Ford Coppola went to the Dominican Republic to film the memorable Cuba scenes for The Godfather: Part II. As hospitable as the country was to the director, his crew and the actors at that time, things have gotten even better. The film industry in the Dominican Republic has substantially expanded since then, in large measure because the country has different and diverse natural scenery, from beaches to mountains, and buildings that were constructed in colonial times as well as more recently. Costs to film and produce movies are lower in the Dominican Republic than in many other places, too.
But one of the major reasons for the film industry’s explosive growth has been the Dominican government’s interest in supporting it – in particular, the country’s recent adoption of a law to promote and encourage the industry.
One of the goals of the Dominican Republic’s new Film Industry Law was to modify the country’s tax system so that it stimulates the film industry and encourages domestic and foreign investment in the industry. Toward that end, the Film Industry Law contains a number of tax incentives for the film industry itself, and for domestic and foreign investment in the industry.
For one thing, investors in Dominican feature film projects approved by the newly created General Directorate of Films may deduct 100 percent of their investment for purposes of calculating their income tax for the period in which the investment is made, subject to a cap of 25 percent of the income tax otherwise payable.
Another income tax benefit is available for producers and distributors of films in the Dominican Republic. This tax benefit provides that income that is capitalized or reserved for new films or investments in films is completely exempt from income tax. In addition, income earned by individuals or businesses domiciled in the Dominican Republic for providing technical services for all films that are shot in the country are exempt from income tax.
Moreover, all foreign films produced in the Dominican Republic are exempt from paying the value-added tax applicable to the transfer and importation of most goods and services (“ITBIS”). Foreign films also are essentially exempt from all other municipal taxes with respect to filming, film equipment, and general production, except for taxes relating to the National Film Information Registry.
The new Dominican Republic Film Industry Law also provides that any individual or business that establishes a film studio in the country is entitled to a complete income tax exemption for income earned by the studio for 15 years from the law’s effective date. Additionally, the new law provides that capital goods may be imported duty free for a decade from the law’s effective date.
These film industry tax incentives are available to any individual or companies that administer, promote, or develop films and other audiovisual works that meet the following minimum requirements:
The law also provides that funds that are generated by taxes on film-related goods and services are to be channeled back to the film industry.
In addition to establishing financial incentives for the film industry and for foreign investment in the film industry, the Dominican Republic’s Film Industry Law helps smooth the way for the production of films. It reaches that goal in a number of ways.
For example, the law creates a General Directorate of Films under the Dominican Ministry of Culture that is empowered to do everything from promoting the production of films and policies encouraging Dominican and foreign financing of the film industry to executing partnership agreements with Dominican and international organizations for the purpose of promoting the film industry’s activities. The General Directorate of Films also can provide financial support to the industry through a Film Promotion Fund and other incentives. Additionally, the General Directorate of Films is authorized to facilitate and encourage imports of raw materials, capital, equipment and services relating to the film industry, and to support the growth of the technical businesses required by the film industry.
To further encourage the production of films in the country, the new film law facilitates customs, procedures and administrative systems, and it establishes a special tariff schedule for the production of foreign films in the Dominican Republic.
The Film Industry Law does more than just create financial incentives and eliminate bureaucratic difficulties for filmmakers – although those certainly are its primary purposes. In addition, the Film Industry Law reflects the country’s respect for films and the industry and its eagerness to welcome both filmmakers and foreign involvement and investment in the industry.
Toward that end, the law creates the “Dominican Cinematheque,” an agency of the General Directorate of Films, with its own institutional status. Its functions are to (i) safeguard the country’s audiovisual heritage and promote national and international films, (ii) disseminate programs to promote films, both classical and contemporary, (iii) create a center for film documentation, (iv) create the technical conditions necessary to rescue, preserve and protect movies and negatives, (v) search for and collect “visual memories” of the heritage of the Dominican Republic, (vi) create events such as festivals or film presentations to promote the country’s interest in cinema, and (vii) promote research on film matters.
The Film Industry Law also imposes a duty on the producer of any cinematographic work that has received funds from the Film Promotion Fund to transfer and deliver a new and original copy to the Dominican Cinematheque, which will be preserved as a cultural heritage property of the nation, to be reproduced solely for preservation and dissemination. The producers who receive funds from the Film Promotion Fund also must agree, pursuant to a written agreement, that after 18 months has passed from the first public showing of the film in theaters in the Dominican Republic, the film can be displayed and generally communicated to the public by the government through the General Directorate of Films, albeit for no more than a week. Similarly, producers must authorize the cultural presentation and dissemination of the work at showings and festivals, on a national or international level, in which the Dominican Republic participates.
In addition, the Film Industry Law creates an “Intersectoral Council for the Promotion of the Film Industry in the Dominican Republic” under the General Directorate of Films. The Council is composed of:
The Council is empowered to allocate resources from the Film Promotion Fund, created by the law; advise and consult with the Ministry of Culture on matters pertaining to the determination of a film policy for the Dominican Republic; approve programs and projects submitted to the General Directorate of Films; and request information from public and private entities and collaborate as necessary for the exercise of its powers.
The Film Promotion Fund, created and operating under the auspices of the Council, is intended to offer financial support, guarantees and investments for the benefit of producers, distributors and exhibitors as well as for educational policy development in the film industry.
The Film Promotion Fund receives funds from, among other places, the Dominican Republic’s general budget; taxes on ticket or entrance fees to theaters; revenues generated by the tax on transfer of goods and services on sales and rentals of movies; revenues generated by the tax on the sale of goods inside movie theaters; resources generated by the fund’s operations; and donations, transfers, and national or international contributions.
In particular, the Film Promotion Fund’s resources may be used to promote, encourage, and develop educational plans and programs relating to films; create, develop, produce, promote, and disseminate local films and support related to educational activities; conserve and preserve films; conduct research about films for the purpose of developing national policies in this area, and incentives for training in different areas of filmmaking; take actions against those who violate the rights of copyright holders in the marketing, distribution and exhibition of films; establish a National Film Information Registry; and promote the Dominican Republic as a destination for foreign film production.
The Dominican Republic could not be a more welcoming environment for the film industry. With tax incentives, industry and government support, and an industry-friendly atmosphere, filmmakers and the film industry as a whole are finding the Dominican Republic to be an exceptional location in which to operate.
Luis R. Pellerano, a partner in the Dominican Republic law firm of Pellerano & Herrera (www.phlaw.com), leads the firm’s foreign investment and international practice group and is resident in the firm’s office in Santo Domingo, Dominican Republic.