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Cultural Tax-Incentives

Using tax incentives to promote cultural events. In Brazil, there is a law (called "Rouanet"), which gives corporations the incentive to invest in cultural events. This is essentially how city in a poor region is able to finance cultural events...

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Using tax incentives to promote cultural events. In Brazil, there is a law (called "Rouanet"), which gives corporations the incentive to invest in cultural events. This is essentially how city in a poor region is able to finance cultural events...

learn more: Lei Rouanet

"there are some interesting rules in Brazil that allow companies (and individuals) to invest money in arts and movies, and to deduct that investment from their income taxes. In this way, all investments in Brazilian film is tax deductible, and is why you see companies like Petrobras, Banco do Brasil and others investing heavily in Brazilian film production. This is very similar to how Brazil funded the development of the airline industry (Embraer). Companies that invest benefit because of the good will that these investments create in the community, and since the investment comes off of their taxes...there is no risk, no down side. "

learn more: Lei Rouanet

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Brazilian Carnival

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DeletedUser

Great idea! So companies/individuals can invest in certain companies and claim that investment against their income? But does this investment have any taxable return for the investor? How does the government get a return besides nice art?

For example, lets say Petrobras gives $1M to make a movie to Brazil Film Org (BFO). The movie makes $5M in profit. Does any of that go to Petrobras or do they just see a $1M reduced tax burden? Does Brazil collect taxes on the $5M BFO made in the movie or do they require all profit be reinvested?

I think you are onto a unique platform for tax efficient capitalization, and would love to get into some of the details.

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Yes, companies can invest in movies (and other cultural events, activities, projects) and deduct those investments off of their taxes. Im not a Brazilian lawyer, but my understanding is that the companies stand to benefit on their investment in two ways: (1) good image of being associated and supporting culture, and (2) shareholder in film if it is a commercial success. As an example, one of the most successful Brazilian films in recent history was called "Tropa de Elite" (Elite force). Here is an article talking about the investors and the importance of the Law "Rouanet" in funding the films: http://www.istoedinheiro.com.br/noticias/1941_TROPA+DE+ELITE+NO+CINEMA

Use google translate to read in English: http://translate.google.com/translate?sl=pt&tl=en&js=n&prev=_t&hl=en&ie=UTF-8&layout=2&eotf=1&u=http%3A%2F%2Fwww.istoedinheiro.com.br%2Fnoticias%2F1941_TROPA%2BDE%2BELITE%2BNO%2BCINEMA

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DeletedUser

Fascinating. So it seems like 100% of the investment is deductible, to a point, but it is not clear about gains. The key phrase I see is:
Por aqui, a Lei do Audiovisual permite que 100% do investimento realizado seja deduzido do Imposto de Renda, desde que o valor não ultrapasse os 3% do montante devido.
Wish I spoke Portgueuse.
Sorry to get so caught up in the details on this, but I am a bit of a finance nerd and this seems like a progressive social equity product that I would love to learn more about it.

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Yes, I think the "lei rouanet" in brazil is a very interesting econ development project. It helps by giving local companies the incentive to invest in cultural projects ( which might otherwise go unfunded). A big company like petrobras can put up to 3% of their taxes due. In exchange, they get equity. It's like being able to invest 3% of your taxes, with potential upside. A very interesting case study was done by Harvard business school on the Brazilian company "EMBRAER" (4th largest aircraft manufacturer in the world). The. Funding strategy (initially) followed this same model... The Brazilian government gave other Brazilians the incentive to invest in EMBRAER by allowing them to deduct those investments from their taxes. This allowed EMBRAER to access relatively cheap finance. This same model has been copied by the Brazilian government now, but this time for culture, and cultural projects.... Which they see as key to economic growth and development.... (culture, livability, attract talent, spur innovation, creative people, tourism, etc)