In recent years, film tax incentives have played a key role in Spain’s audiovisual industry. These incentives have not only fostered the creation of domestic productions but have also attracted major international co-productions, making Spain a prime destination for film shoots.
In this article, we will discuss what tax incentives in the film industry are and how tax deductions work, as well as the importance of Economic Interest Groups (AIE) in this context, with a special focus on recent legal developments affecting these entities.
What are film tax incentives?
Tax incentives for the film industry are a key tool for financing film productions, which are helping to boost the audiovisual sector—both domestically and in terms of its ability to attract international film shoots.
One of the main tax incentives available in the country is the film tax credit, which allows film production companies to recoup part of their investment in audiovisual projects. These deductions, regulated by the Corporate Income Tax Law, are structured through a system that allows producers to deduct a percentage of the expenses incurred in the production of a film, series, documentary, short film, or animated film; they also apply to performing arts and musical productions.
The tax deduction varies depending on various factors, such as the type of production (domestic or international), the filming location, the use of local resources, and the involvement of Spanish companies in the production. These benefits allow the Spanish film industry to remain competitive in a global market where tax incentives are a decisive factor in choosing a filming location.
The Role of Film Production Companies in Film Tax Incentives
Economic Interest Groups ( EIGs ) are nonprofit entities created to facilitate cooperation among various companies or professionals in order to carry out a common project. In the film industry, EIGs bring together different stakeholders to finance and produce films.
The AIE is established as a production company, carrying out production as part of its business activities; and, thanks to its legal status, it can pass on the tax consequences of production to the partner on the books as of December 31 in exchange for obtaining financing for the project. In other words, a taxpayer who wishes to take advantage of the tax benefits generated by audiovisual production and live performances pays a fee to become a partner in an AIE and thereby be able to claim the favorable tax results associated with it—provided, of course, that there is a return on investment that makes the transaction attractive to these investors.
Film production companies (AIE) play a crucial role in the film industry, as they not only provide access to tax incentives but also facilitate the financing of large-scale productions. Because they are registered with the Institute of Cinematography and Audiovisual Arts (ICAA), these companies can benefit from tax deductions for investments in film production, which significantly reduces production costs.
How do tax deductions through AIEs work?
Tax deductions in the film industry through AIEs serve as a vehicle for tax transparency; an AIE is an entity that passes on any tax consequences arising at its level directly to its resident partners based on their percentage of ownership, so that investors or producers participating in an AIE can receive a percentage of the deduction generated by the film’s production.
The advantages of using an EIT for film investments stem from all of the above, including the following:
- Flexibility, as it allows for the use of a separate entity to carry out the investment, but with a more open structure than that of a corporation and its tax treatment.
- Tax benefits and incentives that are attributed directly to investors as if they were making the investment themselves.
- Opportunity to increase the investment amount in a vehicle with highly flexible management and operations, thanks to the participation of several investors.
For AIEs, the tax treatment is in accordance with the regulations in effect at any given time. AIEs must meet specific requirements established by the ICAA to qualify for tax benefits. These entities are an attractive option for producers, as , in addition to tax incentives, they offer a more flexible and efficient structure for financing projects.
This methodology has been approved and endorsed by the administration, which recognizes the AIE as a producer; it is also supported by the Film Act, which states in Article 21:
“To make better use of the tax incentives provided for in tax regulations (…) the Institute of Cinematography and Audiovisual Arts (ICAA) will promote:
- a) The formation of EETs to which the tax regime established in the TRLIS (Articles 48 and 49) will apply (…)”
The National Court Upholds the AIE Model for Tax Deductions on Audiovisual Productions
Recently, the Spanish audiovisual sector has seen a significant landmark ruling that reinforces the stability of tax deductions in the audiovisual sector and endorses the use of Economic Interest Groups (AIE) as a driver of investment. The National Court issued a ruling in January 2025 confirming that EIGs can indeed obtain tax benefits for film productions, overturning a previous decision by the Tax Agency (AEAT).
This court ruling stems from a dispute between the AEAT and an AIE that had requested a tax deduction for its investment in the production of a film. The AEAT had argued that the AIE did not meet the requirements to be considered a legitimate production company and, therefore, was not eligible for the tax deduction. However, the National Court overturned this ruling, establishing that AIEs, as vehicles for production and financing, are entitled to the tax benefits provided for in Spanish film legislation.
The National Court reaffirms that the Tax Administration cannot contradict its own actions or those of other administrative bodies, such as the ICAA, which is responsible for classifying AIEs as production companies. Furthermore, the ruling establishes that the ICAA’s film producer certificates are fully valid for tax purposes as well, and that the AEAT cannot arbitrarily disregard them.
Impact of the ruling on the audiovisual sector
The ruling not only affects film production companies (AIE), reinforcing their legitimacy as a vehicle for production and financing, but also improves the economic framework of the audiovisual sector in general, maintaining an attractive tax regime for international production and reaffirming Spain as a reliable destination for tax-related investments in the entertainment sector. Furthermore, this ruling is particularly significant for productions filmed in the Canary Islands, a key destination for audiovisual co-productions, as tax incentives have driven an increase in the number of film shoots in the region. In 2024, film shoots on the islands increased by more than 17%, generating direct revenue of approximately 218 million euros and creating more than 14,000 local jobs.
Tax incentives for the film industry have been a key tool in the development of the audiovisual industry in Spain. Tax deductions and the role of film production companies (AIEs) have facilitated the financing of both domestic and international film projects. The recent ruling by the National Court confirms that film production companies are entitled to benefit from these tax incentives, further strengthening the competitiveness of the Spanish industry. Such measures will continue to be essential for attracting investment and creating jobs in Spain’s audiovisual sector.
Jaime Hormeño, Junior Associate in the IP, Media & Entertainment practice at Elzaburu.