The Escapist Issue #81 Now Available

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Written by BuckGB on January 24th, 2007

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I, the producer, advise you to set up a shell corporation in Munich that "owns" my film, wink-wink nudge-nudge. The shell will lease back to my studio all rights for 15 years, in a "production service agreement" and a "distribution service agreement." After the lease expires, I'll buy back the film, cheap. With only 10 million left after you take the loss, you pay tax of only 4.5 million euros, leaving you 5.5 million.

Ach du lieber! You've lost nearly 95 million, right? No, we're not done yet. Follow me closely here: Under the German tax code, you can take the full 90-million deduction, then have your Munich shell company charge me (the American producer) 80 million to lease back the rights to my movie. Because you just took a 90-million loss, you don't have to pay taxes on the 80 million you recouped.

You're only out 10 million, plus the 4.5 million you paid in taxes. You still have over 85 million left! And after you paid me 90 million, and I paid you 80 million back (most of which I got by pre-selling foreign and cable rights to my film), I'm 10 million up on the deal, and I'm not taxed in Germany. Sweet.

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