VAT and Film Production: the tax treatment of executive producer expenses

Executive producer activity: a supply of services subject to VAT

The executive producer provides film production management services. As such, he invoices his services to the executive producer with the application of VAT. This invoicing does not pose any particular difficulties since it follows the classic VAT rules applicable to the provision of services.

Expenses related to production: disbursements or real costs?

The costs incurred by the executive producer on behalf of the executive producer fall into two categories:

A. Invoices borne in the name and on behalf of the executive producer

These expenses are considered to be Disbursements.

Therefore, they must be recorded in Passage accounts.

The reimbursement of these amounts by the executive producer is outside the scope of VAT.

An accountability document is essential to justify these operations.

B. Invoices borne by the executive producer

These expenses are the executive producer's own business.

They must be re-invoiced with VAT application as a opaque intermediate.

Why these differences?

Transparent intermediation vs. opaque intermediation

In terms of VAT, the concept ofmiddleman is essential for determining the tax treatment of expenses incurred by the executive producer:

• Transparent intermediary : acts in the name and on behalf of others. Disbursement refunds are outside the scope of VAT.
• Opaque intermediate : acts in its own name but on behalf of a third party. He is assimilated to a purchaser-dealer and must collect VAT.

To be recognized as transparent intermediary, at least one of the following conditions must be met (BOI-TVA-CHAMP-10-10-40-40, § 20 - see our article on this subject):

• The contract explicitly states that the executive producer acts in the name and on behalf of the executive producer.
• The invoices include the name, address and VAT number of the managing producer.
• The circumstances show that the third party was aware of the executive producer's intermediary role.

If these conditions are not met, the executive producer is considered to be opaque and must charge VAT on all amounts collected.

Formalization and best practices

Drafting invoices and accountability documents

Rigorous documentation is essential to ensure that transactions comply with VAT tax regulations. It is recommended to draw up several key documents:

• Service invoices : they must include an explicit mention of the VAT applied, the corresponding rate and the breakdown between the amount excluding VAT and VAT.
• Disbursement refunds : an annex detailing all the expenses incurred, including the nature of the charges, the amounts excluding VAT, VAT and TTC, as well as the suppliers concerned, must be attached.
• Accountability : this document summarizes the expenses incurred on behalf of the executive producer. It must be accompanied by supporting documents of transactions and specify their accounting allocation in order to guarantee the traceability of financial flows.

Non-deduction of VAT on disbursements

The executive producer must not Do not deduct VAT on expenses incurred on behalf of the executive producer, because they do not belong to him for tax purposes. These expenses must be recorded as disbursements and must not impact the deductible VAT of the executive producer. Rigorous accounting management is essential to avoid any risk of tax recovery.

Fundraising Management

Cash advances paid to finance production do not constitute a taxable benefit and should therefore not: not give rise to invoicing with VAT. In order to avoid any requalification by the tax authorities, it is advisable to:

• Formalize these advances in the form of a refund request by specifying their nature and by explicitly indicating that they are not subject to VAT.
• Record these amounts in Passage accounts to distinguish them from the income generated by the services of the executive producer.
• Ensure that contractual documentation clearly reflects the nature of a simple transfer of funds.

Good documentary and accounting organization makes it possible to ensure the transparency of financial flows and to avoid tax disputes.

Conclusion

The tax treatment of expenses in the film sector, and more particularly producers, depends on the nature of the transactions and the role of the executive producer.

• Service provision : subject to VAT.
• Disbursements : outside the scope of VAT.
• Intermediation : transparency to be specified contractually to avoid fiscal reclassification.

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