New version of the Incentives Act – what changes will be made?

Public consultations are underway on the draft amendment to the Act of 9 November 2018 on financial support for audiovisual production, the so-called Incentives Act. Among other things, the draft provides the end of the automatic granting of grants and indicates that applications for funding will be reviewed by independent experts.

Current rules

Three years ago, the Act on Financial Support for Audiovisual Production came into force. The purpose of this act, among others, was to improve the conditions of the audiovisual production market and to encourage foreign investors to invest capital in productions made in Poland. Under the adopted system, producers, co-producers, and service providers of audiovisual production interested in obtaining financial support for audiovisual production carried out in Poland can apply for reimbursement of 30% of Polish eligible costs, but the Polish eligible costs, which are the basis for calculation of financial support, cannot exceed 80% of the total cost of audiovisual production.

The applicants should achieve a minimum of 51% of points in the qualifying test and submit the application in due time before the start of work. The funding is granted by the Polish Film Institute. The current system is automatic as once applicants meet the formal requirements, funds are awarded in order of submission on a first-come, first-served basis until the funds allocated for a given year are exhausted. The draft amendment, which is currently subject to public consultation, assumes significant changes in this regard.

Expert committee

The project provides that there will be an opinion on an audiovisual work by independent experts before support is granted, which should be considered the biggest change provided for in the amendment. In the justification for the amendment, the authors of the draft indicate the need for additional assessment by independent entities in order to increase the control over the funds granted from the state budget. This proposal is significant because it completely changes the nature of the process of applying for financial support. The automatic nature of awarding funds would be replaced by a kind of discretion, which would result from the introduction of expert commissions.

Expert committee members will consider the following criteria:

1) artistic, cognitive and ethical values;

2) significance for Polish and European culture, history, tradition;

3) important cultural values (e.g. human rights, tolerance, equality, ecology);

4) enrichment of European cultural diversity;

5) importance for the development of Polish audiovisual sector;

6) economic and business benefits resulting from audiovisual production or from the provision of services for audiovisual production, in particular in areas with poor economic or social development;

7) the development of new technologies and infrastructure resulting from audiovisual production or from the provision of services for audiovisual production;

8) promoting innovative forms of financing for audiovisual production.

Thus, not only cultural and traditional aspects would be assessed, but also innovative and economic factors. Moreover, the wording of the draft amendment does not imply that the Director of the Institute is bound by the experts’ opinion.

Who can be an expert?

According to the proposed wording of the amendment, the Institute’s director would choose candidates who are representatives of the film and opinion-forming circles, and the minister competent for culture and national heritage protection should appoint at least 7 experts from among the candidates presented by the Institute’s director. The experts would be appointed for a period of 12 months. They cannot be in any way connected with producing an audiovisual work that is subject to their evaluation. Each time an audiovisual work would be assessed by at least two experts. It is worth noting that the draft amendment does not provide for consultation with the film industry on the selection of experts.

What else does the project provide?

Apart from the introduction of the independent expert’s opinion, the changes proposed in the draft amendment also include a more precise definition of Polish eligible costs. So far there have been numerous interpretation difficulties regarding when Polish eligible costs should be incurred. The draft clarifies that these are costs paid for work carried out during the period covered by financial support.

The draft amendment also provides for an obligation to give written reasons for a negative decision on the application. The applicant will have the right to resubmit the application according to general rules, provided that the written justification for the negative decision is followed.

The project also envisages several other changes, including extending the deadlines for examining an application for financial support from 28 to 60 days, changing the rules of settling subsidies from the state budget obtained by PFI (Polish Film Institute), adding the obligation to attach to the application the original language version of the financial plan, or giving the Director of the Institute the power to consent to the transfer of the names, surnames, and functions of individual members of the film crew carrying out the work covered by financial support instead of the transfer of the data of people working on the entire production.

What’s next?

Undoubtedly, the proposed changes will be a revolution in the process of granting financial support for audiovisual productions. Ending with the automatic granting of financial support will result on focusing financial support in productions considered by experts as more valuable and will make this tool more similar to the subsidies from the PFI funds within operational programmes. Moreover, these changes may discourage foreign entities from planning production in Poland, due to the lack of certainty of obtaining adequate financial support and the lack of automatism – which was supposed (in the assumptions of the cash rebate and tax credit solutions) to focus on economic benefits resulting from an increase in the scale of film production, and not on supporting “artistically and culturally valuable” projects. The impact on foreign investors could be significant especially if neighboring countries – e.g. the Czech Republic – are changing their implementation rules, keeping them automatic, and only increasing budgets for production.

We will keep an eye on the legislative process and report on it on the blog.

Authors:

Paweł Myrda – Attorney at LSW Leśnodorski Ślusarek i Wspólnicy.

Marlena Kudła – – an intern at the Intellectual Property Department.