France plans to raise subscription tax, billion-euro film investment faces uncertainties

 A proposed change to France’s pay-TV subscription tax could throw doubt on film investment deals in the coming years.Canal+ Group Chairman Maxime Sada warned that if the government increases the relevant value-added tax rate from 10“ to 20”, the group may withdraw from an investment arrangement of approximately one billion euros with the French film industry.The proposal still needs to go through parliamentary procedures and the investment agreement has not yet been officially terminated.

The current preferential tax rate applies to related subscription services. The draft government finance bill proposes to cancel this preferential rate and use the French standard 20“ tax rate.Canal+ is France's largest pay-TV operator and an important player in film financing, so this tax change will affect both the subscription business and the film and television industry.

The group estimated in a statement on October 1 that if the measures are implemented, the negative impact on revenue and operating profits may reach 200 million euros per year.The company said it was unable to absorb such losses in France and would have to adjust its operations at home and overseas territories. Potential impacts include subscription pricing, staff arrangements and financial investment in film and sports.

The statement also pointed out that the French tax authorities confirmed that the group applied a 10” tax rate less than a year ago.The company therefore opposed sudden changes to existing arrangements and said it would make its position clear to the public sector.For enterprises, tax rate changes not only increase operating pressure, but also affect long-term contracts signed according to the original conditions.

Saada spoke further about the film investment deal in the radio interview.The group has committed to investing approximately one billion euros in French and European films from 2028 to 2032.He believes that the preferential VAT rate constitutes an important exchange condition in the contract. Once the standard tax rate replaces the preferential tax rate, the conditions for the establishment of the agreement will also change.

His statement is the company's judgment on the consequences of the contract. At this stage, it cannot be regarded as that the judicial authorities have determined that the agreement is invalid.Whether the proposal is passed, how the final provisions are stipulated, and how industry organizations and groups handle the contract will also affect the outcome.Clarifying these steps helps to understand why film investment is already under pressure but has not yet reached a final conclusion.

If the group switched to only meeting strict regulatory minimum obligations, Saada estimates that annual contributions to film could fall to about €50 million.This figure describes a possible arrangement, not the cuts that have already been carried out.The real concern for the industry is that once long-term commitments are reduced, the funds originally used to support film production will be reduced.

The relationship between Canal+ and French cinema is also based on the coordination of screening windows and investment obligations.The group has long believed that major film investment should be subject to taxable and regulatory conditions; in the past, film investment was also a core content of negotiations around how long it would take to enter TV services after theater chains.Obtaining video playback rights earlier can support the platform in attracting subscribers.

This relationship connects the financing needs of film companies, theatrical distribution and pay television operations.The film is first released in theaters and then enters the subsequent playback window, and each stage generates its own income.The platform invests funds in advance and obtains corresponding rights; after tax and regulatory conditions change, all parties need to re-judge whether the original exchange can still be maintained.

The background of the government's adjustment is that the financial department hopes to achieve an improvement of approximately 43 billion euros in 2027 through cost savings and increased revenue.For the film and television industry, macro-financial arrangements will be transmitted to production funds through tax rates, public budgets and platform contributions, and the impact is not limited to a certain film.

The same draft finance bill also involves the public broadcasting budget, which is proposed to be cut by about 47 million euros, bringing the related allocation to about 3.82 billion euros.The head of the French Television Group also previously talked about the decline in advertising revenue, believing that financial pressure will threaten local cultural production.Commercial pay TV and public broadcasting face different pressures, but they are both related to film and television investment.

The draft also proposes to reduce the tax deduction benefits enjoyed by YouTube, TikTok and other platforms for advertising income.After broadening the tax base, related funds flowing to the French National Center for Film and Animation may increase.This direction coincides with the adjustment of pay TV tax rates, which shows that the bill involves the allocation of funds among multiple channels and cannot simply be written as a uniform reduction of all film and television support.

Canal+ currently operates in nearly 70 countries. The group stated that it will accelerate international expansion and will continue to communicate with the French public sector.The next thing the French film industry has to face is how to modify and pass the tax proposal, and how to continue to perform the investment contract.Behind the promise of one billion euros is the specific question of whether the film can obtain stable production funds in the next few years.