The 2025 Italian Cinema Tax Credit

Fulvia Tesio

With the passage of Law No. 207/2024, the landscape of tax incentives for the audiovisual and film industry is changing.New thresholds, stricter selection criteria, and a greater role for the state in the management of rights to works have been introduced. Greater selectivity, public rights, and digitization

With the passage of the 2025 Budget Law (Law No. 207/2024), the Italian film and audiovisual sector is facing a significant change in the regulation of tax incentives, particularly with the introduction of new procedures for accessing tax credits and a strengthening of the public sector’s role in the management of rights to funded works.

Reform of Law 220/2016: all articles affected by the revision

Paragraph 869 of the 2025 Budget Law amends seven key provisions of the film legislation, revising funding, tax credits, selective grants, and digitization.

The core of the reform is found in paragraph 869 of the article, which consists of seven subparagraphs (a) through (g) and amends various provisions of Law No. 220/2016, the framework law on cinema and audiovisual media. The amendments address both financial instruments—such as funds and tax credits—and cultural and strategic measures, such as digitization and the promotion of audiovisual heritage.

Seven articles are currently being revised:

• Art. 12 – Objectives and types of intervention;

• Art. 13 – Investment Development Fund;

• Art. 15 – Tax credit for production companies;

• Art. 21 – General provisions on tax credits;

• Art. 26 – Selective grants for projects of high cultural value;

• Art. 29 – Extraordinary Plan for Digitization;

• Art. 32 – Public Register of Works.

New tax credit regulations for production companies

Flexible rates and differentiated criteria: how the tax credit for producers is changing

The tax credit will no longer be a fixed amount but will range from 15% to 40%, with eligibility subject to qualitative, size, and regional requirements. European and independent productions are given priority.

One of the most innovative aspects concerns Article 15, which pertains to tax credits for film and audiovisual production companies. The new mechanism provides for a range of between 15% and 40% of production costs, leaving ample discretion to secondary legislation through ministerial decree.

Toward a more strategic and merit-based tax incentive

The 40% cap is no longer guaranteed: it will be up to ministerial decrees to adjust the rate based on the type of work and the beneficiary, with an emphasis on cultural impact and economic sustainability. Adjustments based on quality and size criteria

The credit will be adjusted based on objective criteria such as:

• Size of the company or group;

• Eligible costs and maximum expenditure limits;

• Type of distribution (theaters, TV, OTT platforms);

• Involvement of national broadcasters or international co-productions;

• Membership in the European Union and production independence.

This selection criterion reflects a European trend toward focusing public resources on culturally significant and economically viable projects. In France, for example, the Centre National du Cinéma (CNC) has for years employed a similar system of selective funding designed to promote diversity in content.

A specific cap is introduced on the compensation of artistic and technical staff involved in production.

The goal is to prevent imbalances in the distribution of tax benefits and promote transparency. Toward a "smarter" tax credit

The 40% cap will no longer be the norm, but rather an exception reserved for strategic productions. The tax credit thus becomes a smart incentive, designed to reward quality, innovation, and deep roots in the European industrial fabric.

New common rules for loans: restrictions on professional fees and greater transparency

Substantial changes also affect Article 21, which sets forth the common rules for the allocation of tax credits to all entities in the supply chain (production, distribution, exhibition, post-production). Paragraph 869(d) introduces a new limit on professional fees eligible for tax credits.

• The limit applies exclusively to production companies;

• It is determined in accordance with the provisions of Decree Law No. 201/2011, Article 23-ter;

• It takes into account the type of work and the nature of the service (e.g., acting, directing, technical).

The measure aims to prevent a significant portion of the tax benefit from being eaten up by high fees, ensuring instead a more equitable distribution of resources throughout the entire production process.

Strategic innovations: state rights, selectivity, and digitization

The state becomes a co-owner of rights: the paradigm of public financing changes

The law provides for the possibility of the state receiving a share of the proceeds from funded projects. This is a completely new development in the Italian system, designed to make the film fund more autonomous and self-financing.

1. Rights to works: the state becomes a co-owner

For the first time, the legislation allows the government to acquire a share of the economic rights to works financed through tax credits. The revenue generated from this share will be reinvested in the Film and Audiovisual Fund, with the aim of making the system self-financing and circular.

This measure is based on the German model of the Filmförderungsanstalt (FFA), where public intervention may include forms of profit sharing.

2. Doubling of resources for targeted contributions

More funding for selective grants and promotion: opportunities for innovative and high-quality projects

The portion of the Film Fund allocated to direct support for works of cultural value has been increased to 30%. This is a clear signal of the commitment to promoting creative excellence and expressive diversity.

The percentage of the Fund's resources allocated to selective grants and promotional activities has been increased from 15% to 30%. This will strengthen support for:

• Works of high artistic and cultural value;

• Experimental and independent projects;

• International promotional initiatives.

3. Permanent digitization of audiovisual heritage

Continuous digitization: $3 million a year to preserve audiovisual heritage

The heritage digitization plan is now institutionalized and permanent. It is a key measure for safeguarding Italy’s cultural identity and expanding access to our historical audiovisual archive.

The digitization plan is now a permanent initiative, with an annual budget of €3 million starting in 2025. The goal is to ensure the preservation, accessibility, and enjoyment of Italy's audiovisual heritage. This reinforces the commitment to modernizing the sector and preserving our collective cultural memory.

Conclusions: Toward a More Sustainable and Competitive Ecosystem

The 2025 tax credit reform marks a decisive step toward a more selective, sustainable, and strategic financing system, in line with best European practices. The introduction of flexible rates, public participation in rights, cost containment, and the enhancement of promotion and digitization lay the groundwork for a more robust, international, and culturally relevant audiovisual industry.

The Italian film industry, which has been both supported and empowered, is now called upon to respond with quality, innovation, and a forward-looking vision, thereby consolidating its position on the global stage.