Concorde trusts in film

Taking advantage of new regulations, a trust set up by Hungary’s leading independent brokerage firm is helping channel private funds into the local film industry – while helping companies win tax breaks for sponsoring film production.

Since it was set up a year ago, the Concorde Film Trust, run by Concorde Securities Rt, has channeled some Ft 500 million (€2.03 million) in subsidies into movies produced in Hungary. With producers, directors and companies getting more involved in the concept, next year’s target is Ft 2 billion.

“The trust is the first of its kind in the region. It links Hungarian and foreign investors in need of financial backing to companies wishing to subsidize movies in order to gain tax benefits,” said Mihály Boris, corporate and institutional account director at Concorde.

The trust has been up and running since the Film Act, introducing the tax benefits in question, was passed last December. In line with this act, companies financing movies made at least partly in Hungary can deduct the amount of their subsidies from both their corporate tax base and their corporate tax. The upper limit of this tax benefit is 20% of the locally incurred production costs of a movie.

This eventually means foreign film production companies can shoot films 20% cheaper by teaming up with a Hungarian investor, which, for its part, gets a 16% return on its investment in the form of tax relief.

Boris stressed the role of Concorde as an intermediary.
“The trust works similarly to an investment fund,” he said. “We evaluate and select productions that have a sound business plan, and undertake to provide a certain percentage of their budget. Then we collect the funds from companies wishing to subsidize, and share these funds between the productions.”

Boris added that Concorde undertakes to carry out all legal and administrative tasks, including dealing with the National Film Office, the government authority charged with monitoring the process and issuing certificates for tax allowances.

According to Boris, the solution provides advantages both for film producers and companies.

“For both parties, this is a very simple solution,” Boris said. “Companies do not need to get involved in the technicalities. Basically, we undertake to spend their subsidies and bring the certificates of tax benefits.

Boris said Concorde chooses the productions according to financial considerations, while the supporting companies are able to broadly declare which types of production they wish to finance.

“Producers also benefit from the way the trust is organized,” he continued. “They do not run the risk of depending solely on one large sponsor, and remain independent of the sponsors, as the latter are not involved in the actual production.”

In exchange for its services, Concorde charges a commission from both parties.

“These commissions vary from deal to deal. No average rate can be described,” said Boris.



Reel opportunities


Industry insiders expect that the provisions of the Film Act, as well as Concorde’s trust, will give a boost to both Hungarian movies and foreign productions being shot in Hungary.
“We have been cooperating with Concorde since the idea of the Film Act was conceived,” said Áron Sipos, president of the Association of Hungarian Film Producers. “We are highly optimistic about the effects of the initiative.”

Boris said the Ft 500 million in subsidies Concorde channeled into films this year helped finance 16 movies, with a total budget of Ft 2.5 billion.

“In 2005, we plan to channel Ft 2 billion into productions, including three or four important, Hollywood-scale movies shot at least partly in Hungary,” he added, while declining to name the potential major productions in question.

Balázs Zachar, head of department at the Cultural Heritage Ministry, said the government welcomes Concorde’s initiative, though adding that the regulations concerned might still need some finishing touches.

“Currently, the regulation phrases quite broadly what can be accounted as direct production costs incurred in Hungary [as the basis of sponsors’ tax benefits],” he noted. “So, for example, there might be misunderstandings at the National Film Office regarding the extent to which star fees for a movie shot partly in Hungary can be included in these costs.”
Even so, Zachar expressed confidence that such issues can be cleared up with a decree.


“We see that the Film Act created an excellent way to invite private capital into the movie industry, increasing its competitiveness,” he said.

From the point of view of filmmakers, though the trust is regarded positively, some concerns arise when it comes to financing.

“I believe the activity of the trust will be warmly welcomed among Hungarian moviemakers,” said film director Gábor Fischer. “However, it does not solve the biggest problem of filmmaking, which is liquidity. When a movie receives subsidies, it is given the net amount of the budget of the film. This means that with a movie with a net budget of Ft 200 million, another Ft 50 million – the amount of value-added tax – is missing.”

Fischer explained that this often means some people participating in the moviemaking process are not paid on time.

“A very simple solution would be a sort of VAT loan, which could make the entire financing a lot smoother,” he proposed. “It would not be risky for banks, either. They could ask for the financing plan of the film as a condition of the loan, and after the return of the tax, they would surely get their money back.”


Fischer stressed that this construction works elsewhere in the world, but has so far failed in Hungary.

For its part, Concorde has been actively promoting its service to foreign producers to lure them to Hungary, said Boris.
“Of course, we’re interested in funding local productions as well as foreign ones,” he stressed. “But the typical budget of a 100% Hungarian film is around Ft 200 million, a fraction of large-scale international movie budgets, which therefore provide more financing opportunities.”


Referring to the large-scale movie studio projects recently launched near Budapest, in the towns of Etyek and Pomáz, Boris said informal cooperation is already taking place, though he noted that these projects are still at a very early stage of development.

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