The National Court has delivered a significant victory for the Canary Islands' film industry by annulling a €22.5 million tax assessment imposed on the Economic Interest Group (AIE) responsible for filming the blockbuster Clash of the Titans in the archipelago in 2010.
The Spanish Tax Agency had initially denied the AIE access to tax deductions for film production, arguing that the company did not meet the requirements to be considered a genuine producer. According to the agency, the AIE acted merely as a financial intermediary, without assuming risks or making key production decisions.
Court Confirms AIE's Right to Tax Deductions
The court's ruling contradicts the Tax Agency's interpretation and affirms that the AIE met all legal criteria to benefit from the tax incentives. This decision is particularly important for the Canary Islands, where AIEs have played a crucial role in attracting international film productions by leveraging the region's favourable Economic and Fiscal Regime (REF).
In 2024, film, series, and documentary productions in the Canary Islands increased by 17.6% compared to the previous year. These productions generated €218 million in direct revenue and 14,675 local jobs, figures representing a 49.6% rise in income and a 40% increase in employment over 2023.
Implications for the Film Industry
The ruling establishes that an AIE can be considered a film producer if it meets the conditions outlined in film legislation, regardless of whether it outsources certain services or collaborates with international partners.
This interpretation safeguards the financial model that has drawn significant investment from major players in the global audiovisual industry to the Canary Islands.
The film Wrath of the Titans, directed by Jonathan Liebesman and starring Sam Worthington, Rosamund Pike, Liam Neeson, and Ralph Fiennes, brought substantial investment to the Canary Islands, particularly Tenerife. The production boosted local employment and invigorated the regional economy.
Canary Islands: A Global Film Hub
The verdict bolsters the Canary Islands' status as a global film production hub, reinforcing investor confidence in a financing model that has already attracted numerous high-profile projects to the region. The decision sets a crucial precedent for the audiovisual sector's fiscal rights in Spain, and especially in the Canary Islands.
While the Tax Agency retains the right to appeal to the Supreme Court, the National Court's ruling establishes a critical benchmark for protecting the film industry's financial incentives. The outcome is expected to solidify the Canary Islands' position as a premier destination for international film production, offering both financial benefits and exceptional filming locations.
