Over the past 15 years, Italy’s tax credit system has become one of the key drivers of its film and audiovisual production industry. But recent reforms have sparked confusion and disrupted workflows, especially for smaller independent production companies. To better understand the origins of the scheme, its current state, and the impact of the latest reforms, Celluloid Junkie talked to Francesco Lattarulo, financial consultant, producer and Chief Financial Officer at Mediterraneo Cinematografica, a production company based in Bernalda, Italy.

Lattarulo has monitored the evolution of the tax credit and the growing relevance it has acquired in supporting Italian productions. He outlined how the scheme has changed over the years, what went wrong in 2024, and how recent corrective measures are addressing key concerns raised by the industry.

From Temporary Relief to Structural Backbone
The Italian tax credit system was officially introduced in 2009 following the implementation of fiscal incentives included in the 2008 Finance Law. “Initially, it offered a 15% tax rebate on production costs for Italian films, capped at EUR €3.5 million (USD $4 million) per company annually,” Lattarulo recalled. “It was supposed to be temporary, running from 2008 to 2010, but its immediate impact led to its institutionalization.”

The pivotal moment came with the approval of Law 220/2016, commonly referred to as the “Cinema Law,” which established a permanent Film and Audiovisual Fund to support domestic and international production. “This law solidified the tax credit’s role, increasing the rebate rate up to 40% and broadening its application to include documentaries, animation, and even web or TV content,” he noted.

The effect was striking. According to data from Italy’s Ministry of Culture, the number of projects benefiting from tax credits rose from 191 in 2018 to an average of 600 between 2019 and 2022, peaking at 956 projects in 2023. However, this production boom brought side effects: “Labour costs and production expenses surged—by as much as 46% over five years, according to E-Media data presented at Rome’s MIA Market in 2024,” Lattarulo observed.

The 2024 Crisis and a Sector at a Standstill
By early 2024, the production landscape had changed dramatically. Although Lattarulo refrained from confirming the widely circulated estimate that over 60% of productions were stalled—no official data has been published in this regard—he acknowledged a sharp slowdown, particularly for small and mid-sized independent outfits. “The uncertainty came from regulatory changes and a lack of clarity on how to access the revised tax credit scheme,” he remarked.

The changes stemmed from a new inter-ministerial decree issued on 10 July 2024, which replaced the earlier decree from February 2021. “This reform introduced stricter financial, fiscal, and commercial requirements, making it significantly harder for smaller companies to qualify,” Lattarulo pointed out. The reforms were put in place to prioritize “quality” productions featuring Italian talent and stories, while capping payouts for international co-productions at EUR €18 million (USD $20.9 million) and local productions at EUR €9 million (USD $10.45 million). These reforms were so disruptive that they triggered widespread backlash across the industry, eventually leading to political negotiations and the development of a “corrective decree.”

This corrective decree did not scrap the July reforms but instead adjusted them. “It aimed to soften the access requirements—especially those that effectively made the tax credit selective, when it had always functioned as an automatic support tool,” he commented.

One core issue was the redefinition of the tax credit itself. “The system is shifting from a model of automatic ‘starting financing’ to one more akin to ‘gap financing’,” Lattarulo clarified. Under the new rules, productions are required to meet more precise eligibility criteria, including theatrical release obligations, reduced state aid ceilings, and tighter definitions of eligible expenses.

Impact Across the Value Chain
The updated regulations have affected producers most directly. “They now need to focus far more on compliance with collective labor agreements, administrative accuracy, and structured financing strategies,” Lattarulo emphasised. For instance, every invoice over EUR €1,000 (USD $1,160) must now explicitly state the project title to be considered an eligible expenditure under the scheme. “It’s a significant administrative burden, particularly for smaller teams.”

Distributors and audiovisual media service providers (SMAVs) are also affected—though indirectly—through their financing obligations. “In co-productions or acquisition deals, they’re now required to invest a minimum share of the total budget—at least 20% in some cases,” he added. Contracts must also clarify rights ownership, holdbacks, and provide transparent viewership data.

Among the most controversial provisions of the July 2024 decree was a clause requiring a distribution deal with one of Italy’s top 20 distributors—labelled “primary distribution companies”—prior to applying for tax credit. “This was a serious obstacle for many independent producers,” noted Lattarulo. “Fortunately, the corrective decree has now scrapped this clause.”

Exhibitors are affected too, particularly through new circuiting rules that dictate how and where tax-credit-supported films must be shown. “While exceptions exist for objective limitations, these rules do impact release strategies and the programming of theatres,” he observed.

A Crucial Distinction: Market vs Selective Projects
Lattarulo stressed the importance of distinguishing between two main categories of supported works: “market-driven” and “selective” projects. The former are evaluated primarily based on their commercial potential, requiring solid distribution deals and financial coverage. The latter, often classified as culturally or artistically valuable, benefit from selective funding mechanisms either from the Italian government or transnational bodies like the EU or the Council of Europe.

“Selective projects can qualify for up to 80% in public support in some cases, and successful titles may trigger mandatory reinvestment clauses,” he noted. For producers, the key difference lies in the required financing strategy and the level of creative independence permitted.

Circuiting and distribution obligations differ based on whether a project is deemed commercial or selective—and sometimes even based on production budget thresholds.

In a move that has drawn concern from producers, there are also talks of allowing the state to acquire equity stakes in rights and revenues of projects supported by selective funding—after production costs have been recovered.

A Welcome Step Towards Clarity
Asked whether the corrective decree had adequately addressed the industry’s concerns, Lattarulo didn’t hesitate: “Absolutely.” The adjustments reflect the efforts of political stakeholders and working groups within the sector. “This decree demonstrates responsiveness to the realities of those working in production, distribution, and exhibition. It offers clarity, flexibility, and a path forward.”

That said, he warned that ongoing dialogue and monitoring remain essential: “We can’t consider this the final step. The next phase must focus on fine-tuning implementation, simplifying access further, and ensuring that independent voices aren’t squeezed out of the system.”

For now, however, Italy’s production sector appears to be slowly finding its footing again. With clearer rules in place and excessive barriers removed, Italian producers hope to return to what they do best: making films that resonate at home and abroad.

Update (16 July 2025) – Earlier in July 2025, Italy’s film sector was rocked by a scandal that led to the resignation of longtime head of the Italian Ministry of Culture’s film department, Nicola Borrelli. The controversy centers on a EUR €863,595 (USD $100,3340) tax credit granted to a feature film, “Stelle della Notte,” which was never actually produced. The lead producer linked to this fake project is a 46-year-old United States citizen, Charles Francis Kaufmann (alias Rexal Ford). Kaufmann was arrested in Greece and is currently under investigation for a double homicide in Rome involving a woman and her infant daughter, whose bodies were found in Villa Pamphili Park. Kaufmann’s involvement in the fraudulent tax credit application through his company Tintagel Films has intensified scrutiny of Italy’s tax credit system. Authorities have pledged stronger oversight to prevent further abuses, while assuring that the international production rebate program remains unaffected and fully operational.