FAQs on German Film Funds

There is a general rule under the German Commercial Code (HGB) that in financial statements no value may be attributed to self-created intangible goods constituting fixed assets. This has the effect that all expenses incurred in creating such goods are immediately generating a loss as they are not made good by a corresponding book entry in the assets shown in the balance sheet. All future income, on the other hand, will be treated as taxable income as there will be no write-offs or depreciation since the value of the film produced in the balance sheet is nil.

According to a decision by the Federal Tax Court, a film is to be deemed an intangible good as its value goes well beyond the mere value of the master negative.