Ukraine Increases Cash Rebate to 25%, Limits It to Foreign Filmmakers

A law introducing changes to the Ukrainian Law on State Support of Cinematography entered into force on October 19, 2019. The law reviews one form of state support for filmmakers – the compensation mechanism known as cash rebate, introduced by the Law on State Support of Cinematography.

The cash rebate system is aimed at encouraging filmmaking in Ukraine by reimbursing a percentage of the production costs incurred on the Ukrainian territory. According to the previous version of the law, both national and foreign production companies could receive rebates of up to 16.6% for production expenses, and additional rebates to cover fees of actors and film crew members who are non-residents – 10% for foreign residents who live in Kyiv and Sevastopol, and 4.5% for foreign residents in the rest of Ukraine.

In contrast with some other forms of state support, the cash rebate scheme does not require the transfer of any rights (including IP rights) to the state.

What Has Changed?

Ukrainian filmmakers are now excluded from the cashback system and the rebate amount has increased to 25% in order to attract foreign filmmakers to Ukraine and encourage an influx of foreign investment. Foreign producers can now receive an additional 5% rebate for satisfying additional criteria, such as making a film that promotes Ukrainian heritage, culture or history or condemns the enemies of the state.

The compensation amount is similar to those offered by neighboring countries Hungary, Poland, the Czech Republic and the Baltic states. The additional reimbursement of 10% (in Kyiv and Sevastopol) and 4.5% (in the rest of Ukraine) to cover fees of actors and film crew members who are non-residents is left unchanged.

The expenses eligible for reimbursement include the following:

• Salaries;
• Payments to contractors;
• Purchased goods/works/services;
• Rent payment; and
• Other expenses directly related to film production in Ukraine.

Foreign film production companies with Ukrainian residents as owners, shareholders, ultimate beneficial owners and/or executives are also excluded from the reimbursement system. This is intended to prevent Ukrainian-controlled foreign-based production companies from taking advantage of this form of state support.

The law also specifically excludes production companies that include an aggressor country’s residents as owners, shareholders, ultimate beneficial owners and/or executives.

In order to obtain compensation, the foreign producer must have a production agreement for all or part of the film with a Ukrainian cinematographic company or an individual contractor. This does not mean that the cash rebate system is limited to co-productions, because the Ukrainian counterpart can also be a visual effects, animation or computer graphics studio, for instance.

The minimum total expenses eligible for compensation were also significantly lowered, to also attract low-budget productions:

• Approx. EUR 315,000 for cinema films;
• Approx. EUR 87,000 for television films;
• Approx. EUR 55,000 for documentary films;
• Approx. EUR 261,500 for TV series;
• Approx. EUR 150,000 for commercial films.

Apart from attracting foreign filmmakers and investments into Ukraine, the revised cashback system may also help make Ukraine a decent alternative to neighboring countries like Hungary, Poland and the Baltic states, which are becoming European film industry hubs and attracting major film studios due to similar cash rebate initiatives.

By: Igor Alfiorov

For more information, please contact Igor Alfiorov at our Ukraine office.