What do you want to know?
Why invest in SOFICA?
Film and audiovisual industry finance companies (Sofica) collect dedicated private funds to finance film and audiovisual production. This device allows subscribers of units to benefit from a substantial income tax reduction.
If you are domiciled in France for tax purposes, you benefit from a tax reduction by investing in a financing company for cinematographic or audiovisual works (Sofica).
There are two main types of SOFICA:
back-to-back SOFICAs: SOFICA enters into an agreement with a company that undertakes to buy back part of the investments at a price agreed in advance;
non-backed SOFICAs: SOFICA is not subject to any buyback guarantee at a price fixed in advance, but rather revenue rights negotiated on a case-by-case basis.
The main advantage of Sofica is the tax reduction they provide.
The investment gives the right to a tax reduction ranging from 30% to 36% of the amount of net payments. This reduction can reach 48% if the company devotes at least 10% of its investments to the production of series or to the export of French works abroad.
Sofica benefit from a ceiling for tax loopholes more generous than usual: 18,000 euros. However, a taxpayer cannot invest more than 25% of his overall net income in this tax exemption system.
On the other hand, purchasers of SOFICA units benefit from an increase in the annual ceiling of tax loopholes , which is then increased to 18,000 euros (against only 10,000 euros usually)
SOFICA: Tax exemption by investing in cinema and audiovisual.
What is a SOFICA?
SOFICAs are public limited companies subject to corporation tax under the conditions of common law. Investing in Sofica is investing useful.
Since 1986, these companies have financed independent audiovisual film productions, their investment policy being guided by the National Center for Cinema and Animated Image. The CNC has each Sofica sign a professional charter to support risky production.
They are required to invest in part in films for which the budget is less than 8 million euros, in first and second films as well as in animated cinema and audiovisual works.
They constitute investment companies intended for the collection of funds devoted exclusively to the financing of audiovisual and cinematographic works approved by the CNC.
The major advantage of an investment in a SOFICA is of a fiscal nature since it allows you to benefit from a reduction in income tax.
In exchange for the agreed risk-taking, the subscriber obtains a tax reduction equal to 30% of the amounts invested, increased to 36% or 48% under certain conditions.
Another advantage, the investment in a SOFICA makes it possible to bring a significant support to the French cinematographic and audio-visual heritage.
Investment in Sofica is subject to two types of caps: a specific cap specific to Sofica and a cap for specific tax loopholes:
Regarding tax loopholes, the subscriber of Sofica shares benefits from an advantage: this investment is in fact not included in the overall cap on tax loopholes at 10,000 euros since, in the event of subscription of Sofica shares, the limit for the cumulative tax reductions are increased to 18,000 euros per year.
Concerning the ceiling specific to Sofica: The investment in Sofica is limited. The law provides for a double limit of 18,000 euros and 25% of overall net income. The tax advantage amounts to a maximum of 8,640 euros.
Subscribe SOFICA shares
The entrance ticket to a SOFICA fluctuates around 5,000 euros.
SOFICA shares are public limited company shares. They must be subscribed in cash and in registered form.
To buy shares, be aware that the distributors vary from one Sofica to another.
Some are only accessible through a single banking network. Others can be purchased from many distributors.
Thus, La Sofica La Banque Postale Image 15 is only distributed by La Banque Postale. On the other hand, the Sofica Indéfilms 10 can be subscribed through wealth management advisers.
Tax reduction
The tax reduction is equal to:
i.e. 30% of the sums invested,
or 36% (increase of 20%) in the event that the company undertakes to make at least 10% of its investments directly in the capital of production companies before December 31 of the year following that of the subscription. In the event of non-compliance with the 10% investment commitment in the capital of production companies, the company is liable to a fine of 8% of the amount of the subscriptions.
Or 48% for investments when the beneficiary company realizes at least 10% of its investments in the capital of realization companies before December 31 of the year following that of the subscription and undertakes to devote within a period of one year from its creation:
or at least 10% of the investments in expenditure for the development of audiovisual works of fiction, documentaries and animation in the form of series made by the production companies in whose capital the company has subscribed;
or at least 10% of investments in cash payments made by production association contracts, in return for the acquisition of the acquisition of rights relating exclusively to revenue from the exploitation of cinematographic or audiovisual works to the foreigner.
Investor Profile
Subscription to SOFICAs constitutes an investment essentially reserved for taxpayers who are in the highest marginal tax bracket.
The benefit of the tax advantage is reserved for individuals having their tax domicile in France.
The subscription must be direct and must not be made through a SICAV or an FCP.
The shares must be subscribed for in cash.
These must be in registered form.
SOFICA must have been approved in advance. To benefit from the deduction, the declarant must attach the statement drawn up by SOFICA.
A single person cannot directly or indirectly hold more than 25% of the capital of a single SOFICA.
Back-to-back and non-back-to-back sofica
There are two types of SOFICA: the “back-to-back” and the “non-back-to-back”:
Back-to-back SOFICAs are those that have established an agreement with a production company. They invest in part with the latter or in its productions in exchange, the production company undertakes to reimburse the amounts invested. Investment prices can also be negotiated which allows investors not only to recover part of their capital but also to make a less risky investment.
Non-backed SOFICAs are not “backed” by a production company and do not guarantee a return on investment for this purpose.
Note that most Sofica currently on the market combine the two
Whether it is a finance company for the film and audiovisual industry backed or not, the two aim to finance cinematographic and audiovisual works in the French language (with some exceptions) and make it possible to benefit from revenue from the exploitation of works.
Taxation
Dividends are taxable at IR in the category of income from movable property.
Capital gains in that of capital gains on the sale of securities
The basis for calculating the reduction, consisting of the amount of subscriptions, is limited to € 18,000 per year and 25% of overall net income.
The amount of the benefit was subject to the global cap on tax loopholes of € 18,000.
If the reduction is not charged, it is neither transferable nor refundable.
The reduction is resumed when all or part of the securities giving right to the reduction are sold before December 31 of the 5th year following that of the payment, except in the event of the death of one of the spouses or partners linked by a PACS.
The deduction for SOFICA cannot be combined with the IR reduction for subscription to the capital of SMEs or with the deduction for capital losses suffered by business creators.
Dissolution & Ownership of shares
The consequences of a dissolution or a reduction of capital are quite serious: Not only the saver can suffer an economic loss, but he also loses his tax advantage.
In fact, in the event of the dissolution of SOFICA or reduction of its capital, the sums deducted are reintegrated into the overall net income for the year of the subscription year (with payment of late interest).
The deduction can also be called into question in the event of non-compliance with the operating conditions of SOFICAs.
Please note: some SOFICAs, in particular those guaranteeing all or part of the invested capital, impose a retention period.
If the sale of the securities is carried out within five years of their acquisition, the amount of these sums is reintegrated into the taxable income of the year of sale and there will possibly be taxation of capital gains.
What you need to know first and foremost is that these investments often find success.
Nevertheless, they remain very relative since the returns are mainly between 3 and 4% taking into account the tax advantage.
Since the capital invested in a Sofica is not guaranteed by the management company, investing part of your savings there is always risk taking.
If the productions financed do not meet their audience, and that, consequently, the Sofica only gives you back a small part of your initial investment , only 50%, for example,
the return on investment will be negative:
- 0.70% per year over five years
and - 0.40% over ten years ...
To avoid this kind of inconvenience, a number of Soficas warn from the outset that, even if they earn a lot of money, the rate of return paid to subscribers will never exceed 3.50% per annum.
Note: During the term of the investment, the Sofica may have an average return of 1% to 2%.
For that, she must have made the right choices in film production.
The tax reduction applies for the year of effective payment of sums (including costs) for eligible subscriptions, up to a limit of 25% of overall net income, without exceeding € 18,000.
The rate of the tax reduction is equal to 30% since the taxation of income for the year 2012 (36% in 2011; 40% previously) of the subscriptions retained within the aforementioned limits.
This standard rate of 30% has been increased to 36% since the taxation of income for 2012 (43% in 2011; 48% previously) when the company undertakes to make at least 10% of its investments under the conditions provided for in a of article 238 bis HG of the CGI before December 31 of the year following that of the subscription (investments in production companies).
The normal rate of 30% is increased to 48% from the taxation of income in 2017 when the company undertakes to make at least 10% of its investments under the conditions provided for in a of article 238 bis HG of CGI before December 31 of the year following that of the subscription (investments in production companies) and which the company undertakes to devote within one year of its creation:
That is to say at least 10% of its investments in expenses for the development of audiovisual works of fiction, documentaries and animation in the form of series, carried out by the companies mentioned in a of article 238 bis HG of the CGI in whose capital the company has subscribed;
or at least 10% of its investments in cash payments made by production association contracts, mentioned in b of the same article 238 bis HG of the CGI, in return for the acquisition of rights relating exclusively to the income of exploitation of cinematographic or audiovisual works abroad.
Advantages & Disadvantages of Sofica
SOFICA
Example of investment in SOFICA
1
Initial situation
Rémy wishes to diversify its investments.
His overall net income amounts to € 100,000.
2
Acquisition of SOFICA shares
Following the advice of his CGP, he decides to acquire SOFICA shares.
In order to optimize his investment, Rémy subscribes to his bank for SOFICA shares for an amount of € 18,000.
SOFICA's management body guarantees it a redemption price equal to 85% of the subscription price at the end of a period of 8 years.
3
Final situation
Rémy's situation after investment in SOFICAs:
Immediate tax reduction: € 18,000 x 30% = € 5,400
Assumed transfer price: € 18,000 x 85% = € 15,300
Internal rate of return (dividends are not taken into account) net of tax: 2.46%
