Mexico's Value Added Tax for Hollywood Film Production

Mexico has launched a $20-million tax-incentive program in an ambitious move to lure film production from Hollywood and other locales.

Mexican President Felipe Calderon said he hopes the program will make Mexico "the capital of Latin American cinema."

He made the announcement at Baja Studios in the state of Baja California, where James Cameron's "Titanic" and Peter Weir's "Master and Commander: Far Side of the World" were shot in the studio's colossal tanks.

Managed by state-run film financing agency Imcine and Mexican trade and investment body ProMexico, the program offers tax rebates of 7.5% on film productions that exceed the amount of 70 million pesos ($5.5 million). By Mexican standards, where the average budget runs about $2 million, that is considered a high-budget production. The fund will double next year to $40 million.

To qualify, foreign producers must contract local production services. Producers also can write off an additional 10% owed for IVA, Mexico's value-added tax.

"The message is that there is a 17.5% rebate for foreign productions," said Manuel Sandoval, ProMexico's head of strategy and innovation.