The Video Games Tax Relief is a measure introduced in Italy for the first time in 2021, although it had been originally envisioned as far back as 2016 through the so-called “Cinema Law” and strongly supported by IIDEA (then known as AESVI). It provides a 25% tax relief (up to a maximum of 1 million euros per company per year) based on the total amount invested in the production of a video game.
The process for applying, obtaining, and confirming this tax relief involves submitting an application detailing all the specifications of the video game to be developed. This is followed by final approval at the end of the development period and within a set timeframe from the game’s initial release date. This confirmation is accompanied by the submission of a digital copy (or video playthrough) of the completed product.
Although it is not a direct funding mechanism – since no money is transferred to the game developer – the tax relief is one of the most effective tools for supporting both large and small productions. It significantly reduces fiscal expenses related to employee wages or taxes, effectively freeing up additional resources that can be reinvested into the same project or other activities. It is no coincidence that, over the years, tax relief has become the preferred method for supporting cultural and creative industries, and more specifically the video game industry, on a global scale. Historically, France and the UK led the way in the early 2000s, followed by Canada and many other countries worldwide. More recently, the European Parliament has recognized the importance of this tool for the future of the sector at a continental level.
Now that a few years have passed since its full implementation in Italy, we take a first look at its impact with insights from Dr. Nicola Borrelli, Director General of the Directorate General for Cinema and Audiovisual. Dr. Borrelli leads the Italian Ministry of Culture’s department responsible for managing and implementing the Video Games Tax Relief.
We are now about to enter the fourth round of the Video Games Tax Relief. Over the years, dozens of companies, both large and small, have benefited from this tool, along with an even greater number of projects – some of which have already reached the market with excellent results. From the Ministry’s perspective, is it possible to draw an initial assessment of this measure?
Over the past three years, 117 new Italian video games have been supported through the tax relief, corresponding to 99 different development companies. These companies have benefited from the fiscal incentive, managed by the Directorate General for Cinema and Audiovisual of the Italian Ministry of Culture, for one or more new works they have produced.
From one annual session to the next, we have seen an increase in the number of applicants and, consequently, the number of beneficiaries and video games produced. We like to think that the tax relief has made it possible to create games that otherwise might not have been developed – or at least has enabled them to be created with higher quality, larger budgets, fully employed development teams, and greater appeal to investors and publishers. This increased attractiveness also stems from the official recognition by the Ministry of Culture of the cultural and innovative value of these projects.
Compared to the criteria under which it was introduced in Italy – a 25% tax relief with a maximum of 1 million euros per company – many other European countries are introducing similar measures with increasingly advantageous parameters for video game producers. One recent example is Ireland, which offers a 32% tax relief and a maximum of 8 million euros. What are the prospects for this measure in Italy?
The current state aid regime for the production of Italian video games, authorized by the European Commission in 2021, will remain in effect until 2026. Upon its expiration, we will certainly need to revisit the tax relief framework and consider possible improvements. If adequate resources and growth prospects are available, we will also explore expanding the measure.
The tax relief often serves not only as support for local companies but also as a magnet for investments from multinational entities that make strategic decisions based on the most favourable fiscal conditions offered in different regions. National or regional sponsorships at international industry events often aim to influence these decisions. Looking at Italy in this historical moment, the country could offer advantageous conditions to investors, primarily due to the growing availability of skilled professionals alongside relatively lower costs compared to other parts of Europe. What role can the Ministry play in this European (and extra-European) competition to secure the next investment?
One of the goals of the tax relief system, which provides a proportional tax rebate based on the expenses incurred by producers, has always been to enhance the competitiveness of national productions, making them more attractive to both domestic and foreign investors. We are aware that the more we support national productions, the more appealing they become compared to their competitors, and we hope to continue improving this effort.
It’s also worth noting that the primary objective of the Video Games Tax Relief – and the reason it is managed by the Ministry of Culture – is to encourage the production of video games with Italian cultural contents, which tends to be less competitive than productions aligned with mainstream market trends. Our main responsibility is to support and facilitate investments in productions that diverge from market trends but are capable of showcasing Italian and European cultural heritage.
The Italian Ministry of Culture’s goal cannot be to engage in an indiscriminate race to attract investors. Instead, it should focus on strengthening the creativity, innovation, and talent of Italian productions. In this regard, the requirement for projects to pass a cultural value assessment – a unique feature of the Video Games Tax Relief – should not be seen as a limitation but rather as a guarantee of a meritocratic state aid system.
The Ministry, and in particular the Directorate General for Cinema and Audiovisual, has been implementing various support measures for the entire audiovisual sector, especially cinema, for years. Considering this historical experience and looking at what is happening today with such a unique sector as video games, what are the differences from the perspective of a public institution? What challenges and difficulties have you encountered, or are still encountering, in working with Italian game developers?
For the Directorate General for Cinema and Audiovisual, embracing the world of video games at the end of 2021 was a real challenge. Video games are vastly different from the other audiovisual works we were accustomed to. Unlike a film, which remains unchanged after its release and provides a predominantly passive experience, a video game is an interactive product that constantly evolves, offering users a unique experience each time. Each video game is essentially many different works shaped by the players themselves. Faced with works of such distinct characteristics, the Directorate had to start almost from scratch. However, over the past three years, we’ve come to understand this world more deeply, recognizing its needs and unique qualities. We did not presume to fit video game works into the framework of our prior experience with cinema; instead, we always strive to find the right interpretative approaches whenever necessary.
As for the Italian game developer community, it has been a pleasant discovery. We’ve encountered a young, skilled, healthy, and highly pragmatic sector that deserves all possible support to grow and establish itself.
The tax relief is generally considered a valuable tool for projects carried out by well-structured companies, from the smallest to the largest, that are already equipped to navigate the hyper-competitive international digital market. However, we often see independent developers tackling more experimental and auteur projects – frequently addressing “difficult” themes or of high artistic value – seeking innovative ways to test market responses and potentially attract global audiences. This approach is not always compatible with accessing the tax relief but could greatly benefit from a selective support measure, similar to what exists in the world of cinema. What are the chances of seeing such a measure implemented for video games in the future?
The establishment of a selective funding scheme for video games is a project we have been considering for some time. We understand that such support, even if modest, could make a significant difference for emerging developers who may have excellent projects in the works but are not yet able to structure themselves as companies with substantial share capital, and therefore cannot access the tax relief. We would like to invest directly in young talents coming out of universities and academies, giving them the opportunity to create their debut works. So yes, a selective direct funding measure for video games is an idea we share, and it is safe to say that it is among our plans for the future.
We thank Dr. Nicola Borrelli, Director General, and the entire Directorate General for Cinema and Audiovisual of the Italian Ministry of Culture for granting us this interview and sharing some insights into what the future of this important measure might hold in Italy.
This interview article was created in collaboration with Adriano Bizzoco, former Public Affairs Manager of IIDEA – Italian Interactive Digital Entertainment Association.
At the link below, you can find useful information about the Video Games Tax Relief and access the ministerial decree that introduced the measure.
