The German Federal Film Fund (DFFF)

Transcription

1 The German Federal Film Fund (DFFF)

2 Overview The German Federal Film Fund DFFF (Deutscher Filmförderfonds) is a film subsidy scheme set up by the German Government and administered by the German Federal Film Board FFA (Filmförderungsanstalt) in accordance with the DFFF guidelines. Funding under the DFFF consists of a non-repayable grant to film producers and is awarded for theatrically released feature films, documentaries and animated pictures produced, at least to a considerable extent, in Germany. Television productions do not qualify for DFFF funding. The scheme, set up in 2007, has since then enjoyed unprecedented success, boosting German film industry and attracting a variety of high profile international productions to Germany, such as Valkyrie, The International, The Reader, Inglourious Basterds, The Ghostwriter, Cloud Atlas, Hansel & Gretel: Witch Hunters, Rush, The Grand Budapest Hotel, The Monuments Men, or The Voices. Consequently, the DFFF was extended in late 2012 for another three years until the end of 2015, and its annual budget was increased from EUR 60 million to EUR 70 million. The DFFF operates on a first come, first served basis until exhaustion of the annual budget. In principle, funding is granted to applicants fulfilling the award criteria on an automatic basis without discretional jury decisions. The award criteria relate, inter alia, to the applicant, the budget of the project, the structure of the production and the subsequent distribution. In addition, a project has to pass a cultural test. The amount of the grant is determined in relation to the production expenditures in Germany and generally varies between 16% and 20% of the qualifying German production costs. However, for the purpose of calculating the amount of the grant, not all costs incurred in Germany are necessarily taken into account in full. Generally, determining which costs qualify requires a thorough analysis prior to the actual application, particularly as the DFFF will submit the film to a final audit by external auditors to verify if all requirements are actually met. Funding under the DFFF is generally capped at EUR 4 million per film, however, under certain circumstances, the advisory board of the DFFF can approve higher grants of up to EUR 10 million per film. DFFF grants can also be combined with other federal or regional German subsidies. However, due to requirements of European law and save for exceptional circumstances, total funding from public sources must not exceed 60% of the total costs of production. 1 Olswang

3 Award Criteria 1. Criteria regarding the applicant In order to qualify for funding under the DFFF, the applicant must meet the following requirements: The applying producer must be responsible for and actively involved in the actual production of the film. The applying producer must have a track record in Europe, i.e., it must have produced at least one feature-length film in Europe with a theatrical release over the previous five years. In case of a single purpose vehicle founded for the production of the film, the requirement can be met by an affiliated group company of the single purpose vehicle. The applying producer must have its domicile or a registered office in Germany. In order for foreign producers to benefit from the DFFF, they must either have a business establishment in Germany or a German subsidiary (in which case the above award criteria must be met by such business establishment or subsidiary) or co-produce with a German qualifying partner who applies for the DFFF. Generally, the applying coproducer has to contribute at least 20% of the film's total production costs. If the film's total production costs exceed EUR 25 million, a contribution of EUR 5 million is sufficient regardless of the percentage in the total production costs. A merely financial involvement of the applying German producer, however, does not suffice. 2. Criteria regarding the project Funding can be awarded for feature films, animated films and documentaries. In order to qualify, the production has to meet certain criteria: It has to be a feature-length film (running time of at least 79 minutes, or 59 minutes for children's movies). The film has to have a minimum production budget of EUR 1 million in case of feature films, of EUR 2 million in case of animated films, and of EUR 200,000 in case of documentaries. Television only productions do not benefit from funding under the DFFF. Funding requires the production of a German language version. A dubbed or subtitled German version will meet this criterion. Also, applicants must present a final version of the film with German captions for the hearing-impaired. 2

4 Award Criteria 3. Minimum German Spend Requirement Funding under the DFFF is granted in order to encourage and support film production in Germany. Consequently, a grant is only awarded if certain minimum requirements regarding production expenditures in Germany are met. Generally, at least 25% of the total production costs must be spent in Germany. However, if the film's total production costs exceed EUR 20 million, a German spend of 20% of the production costs is sufficient. In any event, the minimum German spend requirement will be met if the German spend amounts to EUR 15 million or more. German spend includes expenditure on goods purchased or services rendered in Germany. Production costs generally qualify if they are spent in Germany on o o services provided by persons who are subject to taxation in Germany (regardless of possible exemptions under double taxation treaties), or goods or services provided by companies in Germany with a place of business/business establishment in Germany and with at least one permanent employee working in Germany. Note: What is recognised as German spend within the meaning of the minimum German spend requirement does not fully correspond with the German production expenditures relevant for the calculation of the amount of the grant. While for the calculation of the minimum German spend requirement expenditures are broadly taken into account as long as the above criteria are met, the FFA will apply stricter standards to determine which of these expenditures qualify as a basis for calculating the grant (for more details regarding such qualifying German spend, see page 6 below). 3 Olswang

5 Award Criteria 4. The Cultural Test To qualify for funding, the project must pass a cultural test based on a point system. The tests vary for feature films, animated films and documentaries. Generally, all DFFF cultural tests differentiate between cultural content (block A.1, e.g., film is set in Germany; principal character depicted in the film is German) and creative personnel (block A.2 of the cultural test), and the use of production facilities in Germany (block B of the cultural test). All projects must fulfill minimum requirements regarding cultural content (block A.1). In addition, they must obtain a certain level of points in total, with points from blocks A and B of the cultural test being required. Accordingly, it is not enough to only use German facilities. Example A feature film will pass the cultural test if (a) in total, it is awarded a minimum of 48 out of 94 points, (b) it has received points under both blocks A and B, and (c) at least four block A.1 categories relating to cultural content are fulfilled. When assessing the eligibility of a film for funding, the FFA will generally attribute the points for the different subcategories on an all-or-nothing basis. Example: Under block A of the cultural test, 3 points are awarded for the use of German landmarks. When assessing the film's eligibility, the FFA will either award 3 points or no points at all. Consequently, any self-assessment prior to, and any potential adaptation of the project in view of, the application should provide for a sufficient safety margin under the cultural test, as a deviating assessment by the FFA would lead to the loss of all points for a respective subcategory. In case of international co-productions produced under the European Convention on Cinematographic Co-Production, the point system established by the European Convention applies in lieu of the DFFF cultural test. Note: While, theoretically, the DFFF operates on an automatic basis, i.e. without discretional decisions by a jury, the necessity to interpret the in some instances vague criteria of the cultural test does give the DFFF a certain leeway in assessing the eligibility of a film for funding. Accordingly, it is advisable to closely liaise with the DFFF at an early stage to prepare the application. 4

6 Award Criteria 5. Distribution Requirements The DFFF guidelines require the film to have a theatrical release in Germany. As a general rule, a film funded under the DFFF has to be distributed theatrically in Germany with a minimum of 45 copies. If the award granted is in excess of EUR 4 million, the film must be distributed in Germany with at least 200 copies. In principle, theatrical release has to occur within one year from the completion of the film. Feature films designed to be broadcast in an extended version as a TV mini-series after the theatrical release (so called amphibian or hybrid productions) are required to be released with a minimum of 200 copies if the TV version is at least 20% longer than the theatrical version. The FFA will verify that the film is appropriately distributed in Germany: A binding distribution agreement must be in place and submitted to the DFFF at the time of disbursement of the grant at the very latest. The distributor must have a track record of having distributed in Germany at least three full-length films over the previous two years with a minimum of 15 copies. A non-exhaustive "white list" of qualifying distributors is available on the DFFF website. If the producer licenses German TV rights to a private or public broadcaster, the licence must provide for a re-assignment of the TV exploitation rights after a period of five years (in certain cases seven years). This obligation varies if the German TV rights are licensed to a distribution company against payment of a minimum guarantee. 5 Olswang

7 The Grant 1. Calculating the Grant For the purpose of calculating the grant, not all production related expenditures in Germany are taken into account. The DFFF guidelines specify which, and to what extent, expenditures are considered as qualifying German spend. As a general rule, productions are eligible for reimbursement of 20% of the qualifying German spend. However, for the recognition of such expenditures, the DFFF guidelines set a general ceiling at 80% of the total productions costs: If the qualifying German spend exceeds 80% of the total productions costs, they shall nevertheless only be taken into account up to this 80% ceiling. Example: For a production with total production costs of EUR 10 million and qualifying German production costs of EUR 5 million, such German production expenditures constitute only 50% of the overall production costs and are therefore taken into account in full. The grant will then be 20% of the qualifying German production costs, i.e. EUR 1 million. If, in contrast, the qualifying German production costs are EUR 9 million (i.e., 90% of the overall costs), the ceiling applies: German production costs are only taken into account up to 80% of the overall production costs (i.e., EUR 8 million). Accordingly, the 20% funding is only granted in relation to this amount (i.e., EUR 1.6 million and not EUR 1.8 million). The net benefit will thus be between 16% and 20% of the qualifying German spend. 2. Qualifying German Spend When determining whether the minimum German spend requirement is met, expenditures in Germany are broadly taken into account. In this context, German spend refers more generally to production costs incurred in Germany (see page 3, award criteria). For the purpose of calculating the grant, in contrast, there are certain limitations as to the extent to which these German production costs are taken into account as qualifying German spend. In this context it can be distinguished between costs that are not taken into account as qualifying German spend at all (e.g. certain costs for development, legal fees, financing costs, actors' travelling costs, overhead), and costs that are only partially taken into account (e.g. screenplay costs are only partially recognised; actors' fees spent in Germany are only taken into account up to an amount equal to 15% of the German production costs). 6

8 The Grant Under certain circumstances, costs incurred for exterior on-location shooting outside of Germany may also be considered as qualifying German spend: They may be taken into account when calculating the grant if shooting abroad on location is necessary to comply with dramaturgical exigencies of the script. In addition, such shooting must not be possible in Germany (or only at unreasonable cost). Costs only qualify with a maximum of 40% of the total number of shooting days. Save for the territorial requirement, the other criteria for qualifying German spend must be met (e.g. services must be provided by persons who are subject to tax liability in Germany or by companies with a place of business in Germany, see page 3). 3. Maximum Amount While automatic funding is capped at EUR 4 million per project, the advisory board of the DFFF may award up to EUR 10 million if 35% or more of the total production costs are spent in Germany, or the project is awarded at least two-thirds of the possible points under the cultural test. The decision is at the discretion of the DFFF advisory board. However, the board has repeatedly granted funding in excess of the EUR 4 million cap. To date, the highest amount granted to a film under the DFFF was EUR 10 million for Cloud Atlas in In 2007, Speed Racer was awarded EUR 9 million and in 2013, The Monuments Men was awarded EUR 8 million. In 2009 and 2011, both Inglourious Basterds and Hansel and Gretel: Witch Hunters received around EUR 6.8 million. 4. Combining the Grant with other Funding The grant can be accumulated with other federal, regional or European public subsidies (e.g. public grants, tax incentives). However, for reasons of EU law, funding can only be combined up to a maximum of 60% of the total production costs (which cap does not apply to small and difficult projects). 7 Olswang

9 The Grant 5. Payment and Audit Generally, the grant will be disbursed upon completion of the production after audit of the final cost reports. The amount may also be paid out in three instalments (33% upon commencement of principal photography, 33% upon completion of the rough cut, and the remainder after audit of final costs). Furthermore, if the grant exceeds EUR 2 million, a completion bond or a bank guarantee will be required for disbursement in instalments. The DFFF will conduct the final audit to verify if the project has conformed to what had been projected in the application. If final audit of production costs shows that, on account of a higher qualifying German spend, the project would have merited more funding, the DFFF can, to a limited extent, increase the grant accordingly and disburse more than initially granted. If, in contrast, final audit reveals that the projected qualifying German costs were not incurred in full, the grant may be reduced accordingly. If the project fails to meet the minimum German spend, the grant may even be revoked in full. The final audit will be carried out by external auditors. The fees are charged directly to the producer and amount to 2% of the grant (for grants of up to EUR 500,000; plus 0.25% for amounts granted above EUR 500,000). Especially with international co-productions, the audit procedure can be lengthy and the disbursement of the final instalment delayed. Once the DFFF has formally awarded the grant, the corresponding entitlement can be assigned or pledged to obtain bridge financing, albeit only to banks and financial institutions. Note: During final audit of the production costs, the DFFF will also verify if the information submitted for the assessment under the cultural test was accurate. Example: An application claiming that 100% of the costs for studio shooting will be spent in Germany will receive points under block B of the cultural test. If, contrary to what was submitted in the application, studio shooting is done outside of Germany, this could lead to the loss of valuable points under the cultural test and, if this results in the film are missing the relevant threshold, the revocation of the grant altogether. 8

10 Application Details Applications have to be filed with the FFA in Berlin. To better prepare the application, it is advisable to liaise with the FFA before the final submission. There are no specific filing deadlines. Applications can be submitted to the FFA at any time, but need to be filed at least six weeks prior to commencement of principal photography. Unless a specific exemption is granted by the FFA, shooting of the film or animation work must not have started at the time of application. As the DFFF operates on a first come, first served basis until the exhaustion of its annual budget, hence application early in the year may be advisable. An application generally requires that 75% of the film's financing is in place and that the grant is required to complete the financing. The entire financing has to be fully closed within three months after the approval of the grant. This period can only be extended once by one month. After the approval of the grant by the FFA, shooting or animation work has to start within four months. Contact details of the German Federal Film Board (FFA): Filmförderungsanstalt DFFF Große Präsidentenstraße Berlin, Germany Tel.: An English copy of the DFFF guidelines of 17 September 2012 is available at: 9 Olswang

11 Other German Subsidies In addition to the DFFF, which is set up as a grant on the federal level, subsidies to film productions are also granted by the German states. They generally consist of limited recourse loans that are to be paid back from certain proceeds of the film after deduction of certain costs. Regional funding regularly requires at least the amount granted to be spent in the respective region (so called local spend requirement). In some cases, the local spend must be in excess of the amount of the subsidy loan. Furthermore, the FFA also grants project funding by way of limited recourse-loans on a federal level as well as so-called reference funds granted to producers if a previous project has reached a certain threshold at the German box office. As mentioned above, regional funds can be combined with each other, with the DFFF or with FFA funding, although, generally, the aggregate funding must not exceed 60% of the overall production costs. The most important regional funding schemes are set up by the following states: Berlin-Brandenburg (Medienboard), North Rhine-Westphalia (Film- und Medienstiftung NRW), Saxony/Saxony-Anhalt/Thuringia (MDM), Bavaria (FFF), Baden-Württemberg (MFG). Your Contacts at Olswang Please contact us for further information on the various national and regional film subsidy schemes available in Germany. Dr. Stefan Lütje Dr. Viola Bensinger Dr. Henrik Armah Dr. Niklas Conrad Partner Partner Senior Associate Senior Associate stefan.luetje@olswang.com viola.bensinger@olswang.com henrik.armah@olswang.com niklas.conrad@olswang.com This guide was last updated in January It contains general information based on German law and, although we endeavour to ensure that the content is accurate and up to date, users should seek appropriate legal advice before taking or refraining from taking any action. The contents of this guide should not be construed as legal advice and we disclaim any liability in relation to its use. 10

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