This is something I’ve heard about a few times now as a sort of controversy about popular or highly anticipated shows being pulled from streaming, sometimes due to the tax benefits that this grants companies. I think it only applies to original programs by that platform but I could be wrong.
What is the purpose of this and can someone please ELI5?
This article mentions some recent cases but it doesn’t say why or how this leads to a huge tax break: https://comicbook.com/movies/news/warner-bros-discovery-tax-write-down-recent-content-cancellations-tnt-tbs-dc/
In: 8
You only pay tax on profits that you make.
So, if you have a business making films and you sell $100 million tickets/streaming/TV deals, but you paid your production staff and actors $63 million, the that is $37 million in profit.
So, the company only pays tax on the $37 million. They don’t pay taxes on the full $100 million of ticket sales.
Let’s take an example a company makes 2 films in 1 year and spends $10 million on each. They sell rights to 1 for $25 million, the other is a turkey and gets $1 million in a streaming deal before getting pulled. The Compnay got $26 million in but spent $20 million – so they are tax calculation goes off tur $6 million profit.
Some of your confusion comes from this article, where the journalist obviously doesn’t understand what they are writing about. Basically if you have a company with stock, you have to give regular updates to the shareholders about how you are doing and how much money you expect to make. So if you spend $10 million making a film, but realise that it it trash and no one will watch, you have to own up and make an announcement to your shareholders saying “oops. We wasted $10 million of your money.”
The person writing this article has seen one of these shareholder announcements, doesn’t know what is going on, and thinks it is some kind of tax dodge.
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