{"id":118407,"date":"2025-04-19T15:08:56","date_gmt":"2025-04-19T13:08:56","guid":{"rendered":"https:\/\/ceadigilaw.org\/cine-y-caos-digital-en-canarias-una-sentencia-que-expone-el-desorden-politico-juridico-del-estado\/"},"modified":"2026-07-17T17:01:15","modified_gmt":"2026-07-17T15:01:15","slug":"cine-y-caos-digital-en-canarias-una-sentencia-que-expone-el-desorden-politico-juridico-del-estado","status":"publish","type":"post","link":"https:\/\/ceadigilaw.org\/en\/blog\/cine-y-caos-digital-en-canarias-una-sentencia-que-expone-el-desorden-politico-juridico-del-estado\/","title":{"rendered":"Cinema and Digital Chaos in the Canary Islands: A Ruling that Exposes the Political-Legal Disarray of the State"},"content":{"rendered":"

By Antonio Tejeda Encinas<\/a> Lawyer. Techno-political analyst<\/p>\n

Introduction: A judicial setback with a political-legal backdrop:<\/strong><\/p>\n

The Audiencia Nacional has recently dealt several significant blows to the Tax Agency by ordering multimillion-euro refunds to Economic Interest Groupings (AIE) over tax incentives improperly denied in the Canary Islands. One of the most recent rulings, dated March 7, 2025, concerns the production company of The Cold Light of Day (5.5 million euros), but it was preceded by another of enormous magnitude: the Wrath of the Titans case, which entailed a refund order of 22.5 million euros. These judicial decisions not only correct restrictive interpretations that generated legal uncertainty in an industry that is key to regional economic diversification, but also expose a structural governance problem within the Administration: a State that issues digital certificates, yet whose agencies operate as disconnected data silos, (at least in key areas where effective mechanisms of functional interoperability have not yet been deployed., incapable of sharing basic information.<\/p>\n

The contradiction between State bodies \u2013where the ICAA endorses projects with electronic signatures, while the Tax Authority rejects them as if they were worthless paper\u2013 calls into question the Government’s capacity to articulate coherent policies. No small irony lies in the fact that, while the Prime Minister himself proclaimed in 2021 his intention to make Spain the \u2018Hollywood of Europe\u2019, the administrative reality displayed a lack of coordination and conflicting criteria that held back those aspirations. This context gives the case an evident political relevance and serves as the starting point for a debate that goes beyond the strictly legal, reaching into institutional design and the digital transformation of the public sector.<\/p>\n

A legal conflict over tax incentives and lack of institutional coordination <\/strong>The legal core of the case revolves around the film tax incentives provided for in the Corporate Income Tax Law, particularly generous in the Canary Islands due to their special Economic and Fiscal Regime \u2013 REF. The AIE \u2013Economic Interest Groupings\u2013 are legal vehicles that allow companies (or professionals) to join together to facilitate or develop an economic activity ancillary<\/strong> to that of their members, in this case, to channel investment into audiovisual productions: several companies join in an AIE to carry out a project (a film, in this case) and in return may benefit from tax deductions in their corporate income tax.<\/p>\n

This formula, fully legal and commonly used in the film industry, was the one employed by the production company of \u00abThe Cold Light of Day\u00bb and other international shoots on the islands. However, the State Tax Administration Agency (AEAT) adopted for years a rigid and sui generis stance: it denied these AIEs the status of producers, and with it the right to the deductions, arguing that they lacked their own resources and that the initiative and responsibility for the production supposedly lay with foreign co-producers.<\/p>\n

In practice, the Tax Authority was dismissing the very nature of the AIE, even though the State, on the other hand, protected and promoted it as a film financing vehicle \u2013an evident paradox that one media outlet described as \u201cthe State protects the AIEs on one side and finds itself driven to question them on the other\u201d due to the unjustified war declared by the Tax Authority\u2013. Here a failure of digital governance is at work: the AEAT did not access the data already validated by the ICAA (electronic certificates, production reports), acting as if they were agencies of different countries, not parts of one and the same State.<\/p>\n

This internal lack of coordination between bodies translated into multimillion-euro penalties and assessments against several productions, undermining the confidence of investors and creators in the incentive system. The legal response was not long in coming: the affected AIEs first appealed through administrative channels (the Economic-Administrative Tribunal) without success, and finally took the conflict to the courts.<\/p>\n

The Audiencia Nacional, in its ruling of March 7, 2025 (preceded by the January 29 ruling on \u00abWrath of the Titans\u00bb), sided with the production companies and dismantled the Tax Authority’s thesis point by point. First, the court explicitly recognized that the AIE acted as a film producer for all purposes, dismantling the idea that subcontracting services or sharing the initiative with foreign partners stripped it of that status. It stressed that, in accordance with the co-production contracts, the AIE assumed full management of the film in Spain (in this case, in the Canary Islands) and therefore meets the production requirements.<\/p>\n

A key argument of the Court was to highlight that the AIE had prior administrative backing: it had obtained from the Institute of Cinematography and Audiovisual Arts (ICAA) \u2013a body of the Ministry of Culture\u2013 the certificates of the work’s Spanish nationality and cultural qualification, as well as the \u201cCanarian audiovisual work\u201d certificate issued by the regional Government. These certificates officially recognized the AIE as the film’s producer and attested to its right to the tax incentive.<\/p>\n

That the Tax Authority nevertheless denied the deduction reveals a worrying lack of institutional coordination. As the Audiencia Nacional itself points out, the AEAT cannot ignore or contradict the decisions of other competent bodies of the same Administration without extraordinary reasoning to justify it. This legal principle (the single legal personality of the State) collides with technological reality: without interoperable systems, the Tax Authority has no automatic access to the ICAA’s certificates, which turns coordination into an act of will, not of technical obligation.<\/p>\n

In support of this position, the ruling invokes principles enshrined in our legal system, such as the doctrine of one’s own acts, the principle of legitimate expectations and, most emphatically, the idea that the General State Administration has a single legal personality. By virtue of that single personality, the acts issued by one body (for example, the ICAA certifying a project as an eligible cinematographic work) bind and commit all other bodies of the General State Administration.<\/p>\n

There is no room for watertight compartments or unilateral actions to the detriment of third parties, all the more so when the legislator itself has encouraged the scheme that the Tax Authority was questioning. Accordingly, the Audiencia Nacional annulled the AEAT’s assessments, ordered the return of the amounts improperly withheld and consolidated an important precedent: the need to interpret tax legislation in line with sectoral (audiovisual) legislation, ensuring coherence and coordination among the various administrative bodies involved.<\/p>\n

In short, the underlying legal problem was revealed to be a problem of administrative discoordination: the Tax Authority acted on its own where there should have been institutional cooperation, and the judicial corrective made this clear.<\/p>\n

Beyond the Law: the institutional failure of the digital State:<\/strong> Reducing the matter to a legal error would fall short. This case exposes a structural failure in the way the State operates in the digital era, (especially when different bodies share functional powers but not integrated decision-making mechanisms): It certifies electronically on one side, yet acts as if that data did not exist on the other. This is not merely fiscal arbitrariness; it is a symptom of an Administration that has not learned to govern with the digital tools it itself promotes, (at least in sensitive areas such as tax incentives in the audiovisual sector, where inter-ministerial coordination is critical.)<\/p>\n

The lack of coordination between the Tax Authority and the ICAA (together with the Canarian regional administration) is not simply a discrepancy of legal criteria, but a failure of institutional interoperability in the heart of the 21st century. In an increasingly digitalized environment, the Public Administration must behave as a cohesive entity, where information and decisions flow efficiently between bodies -In Estonia, for example, the X-Road system allows agencies to share data in real time; in Spain, there is not even a protocol for the Tax Authority to consult the ICAA’s certificates.<\/p>\n

The very concept of interoperability refers to the capacity of systems and processes to share data and exchange information and knowledge automatically and securely. Since 2010, Spain has had a National Interoperability Framework (ENI), a regulatory framework that seeks to guarantee an adequate level of technical, semantic and organizational interoperability among the systems of the Public Administrations. That, despite these formal advances, we still find ministries or agencies acting as isolated silos reveals a gap between the theory and the practice of public governance.<\/p>\n

What this dispute lays bare is a structural shortcoming: the Administration has digitalized citizen-facing procedures, but has still not integrated its internal workings. In the digital era, offering electronic services is not enough; what is essential is that State bodies work on a common foundation. In this case, all the elements for coordinated action were \u2014and are\u2014 available: there was clear legislation assigning powers to Culture (ICAA) to certify film production and to the Tax Authority to grant the corresponding tax deduction, as well as legal principles of inter-administrative cooperation.<\/p>\n

There were also electronic data and certificates that could (and should) have been shared. However, the governance of that data and those powers failed. The flow of information between bodies was insufficient or ignored; the AEAT apparently operated with its back turned to the files already processed by Culture, instead of integrating them into its decision-making process. This is the core of the problem: digital certificates that travel as PDFs by email, not as structured data in interconnected systems.<\/p>\n

This functional isolation, (present at different levels of the Administration, although here it manifests itself in a particularly visible way due to its direct economic impact), points to structural problems: disconnected information systems, the absence of effective communication protocols and, more deeply, an administrative culture that does not encourage cross-cutting collaboration. The result is a State that, despite having modern digital tools, still fails to act in a univocal and coherent manner. It has digitalized the facade \u2014online services, electronic certificates, automated procedures\u2014 but has not transformed its internal logic, where bureaucratic inertias of the last century persist, (something that continues to occur in numerous sectors, despite the regulatory and technological advances available).<\/p>\n

This failure of institutional interoperability has serious practical consequences. On the one hand, it undermines the effectiveness of public policies: the central Government announced tax incentives to attract film shoots and investment (as part of its economic recovery and Brand Spain agenda), but that policy was thwarted in its execution by a lack of internal alignment. On the other hand, it erodes the trust of citizens and companies in the institutions: if a company gets the green light from one State body and is simultaneously penalized by another, how can anyone trust the system?<\/p>\n

In the midst of the digital transition, trust in the Administration depends to a large extent on it acting in a predictable, integrated and transparent manner. When that does not happen, the problem transcends a specific tax file and points to a systemic deficiency in governance.<\/p>\n

In summary, the AIE controversy in the Canary Islands demonstrates that administrative digitalization alone is not enough: it must be accompanied by organizational and cultural reforms. Having digital certificates or advanced rules is useless if each body continues to act on its own. Solving this requires technical responses \u2014system interconnection, shared data, automation of cross-agency verifications\u2014 but also political ones: real willingness to cooperate, institutional leadership and process redesign. Only by addressing both dimensions can we prevent dysfunctions like this one from recurring.<\/p>\n

Towards coherent governance in the digital era<\/strong> The case of the film tax incentives in the Canary Islands leaves us important lessons and points to solutions that go beyond resolving a multimillion-euro claim. The first lesson is that the State must act as a cohesive whole. It cannot afford internal contradictions in the application of its policies, least of all when it comes to boosting strategic sectors.<\/p>\n

The recent rulings of the Audiencia Nacional have restored legality and given a boost to legal certainty in the audiovisual sector, but we should not always wait for the judiciary to harmonize what the Administration itself fragments. Structural reforms must be undertaken.<\/p>\n

On the legal front, the mechanisms of inter-administrative coordination should be strengthened: for example, by explicitly ensuring the binding nature of the certificates and reports issued by competent bodies (such as the ICAA) for the other bodies in charge of the same matter, something that has in fact already been incorporated into legislation after the litigated events. It is also appropriate to review the Tax Authority’s internal protocols so that, before issuing an assessment concerning incentives subject to another entity, there is a consultation with, or at least formal consideration of, that entity’s prior decisions.<\/p>\n

On the organizational-technological front, the solution lies in promoting true operational interoperability. This means developing shared digital platforms where, in cases such as film deductions, the various administrations involved (the ministries of Finance and Culture, regional Governments) work on common information, avoiding duplication and contradictions. One concrete solution would be to implement a blockchain registry of audiovisual certifications, where each ICAA approval generates an unalterable node visible to the Tax Authority in real time.<\/p>\n

One possibility would be a digital \u201cone-stop shop\u201d for cultural incentives, so that producers and managers interact with a single system that aggregates the requirements of all the competent bodies. If the ICAA grants a certificate of an audiovisual work valid for deduction, that data should be recorded in a system that the AEAT accesses automatically at the time of inspection, with no room to disregard it.<\/p>\n

Additionally, it is crucial to foster a collaborative administrative culture: civil servants must internalize that they are part of one and the same Administration at the service of the general interest, and that coordination is not a courtesy but a legal and functional obligation. Training in digital skills and interdisciplinary work can help, but above all political leadership is needed to break up bureaucratic fiefdoms.<\/p>\n

In conclusion, the debate is not only about how a tax law is interpreted, but about how public governance is designed in the digital era. The case of the Canarian AIE is a symptom that our institutions need to update their interoperability and internal governance schemes to live up to the policies they promote. It is not about more technology, but about less bureaucracy: a State where data flows with the same agility as its laws.<\/p>\n

A truly digital administration is not just about having online services, but about being able to offer coordinated, single responses, regardless of how many departments are involved behind the screen. In the long run, addressing this structural dysfunction will strengthen not only the audiovisual sector, but also the State’s capacity to generate coherent and reliable policies in any field. Only by transcending the isolated approach of each body and adopting a comprehensive vision of digital public governance can we prevent dysfunctions like the one analyzed here from recurring, and ensure that strategic objectives \u2014from turning Spain into an audiovisual production hub to any other national goal\u2014 are not thwarted by the institutional tangle itself. The solutions exist; it is now up to us to implement them with resolve and statesmanship.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Antonio Tejeda Encinas Lawyer. Techno-political analyst Introduction: A judicial setback with a political-legal backdrop: The Audiencia Nacional has recently dealt several significant blows to the Tax Agency by ordering multimillion-euro refunds to Economic Interest Groupings (AIE) over tax incentives improperly denied in the Canary Islands. One of the most recent rulings, dated March 7, […]<\/p>\n","protected":false},"author":2,"featured_media":116317,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"wds_primary_category":0,"wds_primary_cea_women":0,"footnotes":""},"categories":[1104],"tags":[],"cea_women":[],"class_list":["post-118407","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-analysis-opinion"],"acf":[],"_links":{"self":[{"href":"https:\/\/ceadigilaw.org\/en\/wp-json\/wp\/v2\/posts\/118407","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ceadigilaw.org\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ceadigilaw.org\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ceadigilaw.org\/en\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/ceadigilaw.org\/en\/wp-json\/wp\/v2\/comments?post=118407"}],"version-history":[{"count":1,"href":"https:\/\/ceadigilaw.org\/en\/wp-json\/wp\/v2\/posts\/118407\/revisions"}],"predecessor-version":[{"id":119248,"href":"https:\/\/ceadigilaw.org\/en\/wp-json\/wp\/v2\/posts\/118407\/revisions\/119248"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ceadigilaw.org\/en\/wp-json\/wp\/v2\/media\/116317"}],"wp:attachment":[{"href":"https:\/\/ceadigilaw.org\/en\/wp-json\/wp\/v2\/media?parent=118407"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ceadigilaw.org\/en\/wp-json\/wp\/v2\/categories?post=118407"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ceadigilaw.org\/en\/wp-json\/wp\/v2\/tags?post=118407"},{"taxonomy":"cea_women","embeddable":true,"href":"https:\/\/ceadigilaw.org\/en\/wp-json\/wp\/v2\/cea_women?post=118407"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}