French game developers are on the verge of losing tax breaks as the result of an EU-wide ban, with Ubisoft likely to be affected significantly and Heavy Rain studio Quantic Dreams looking to move resources to Canada.
Develop reports that French protocols for game development tax relief expired last month and numerous studios in the country are now unable apply for the relief scheme, which ordinarily provides a twenty percent refund on costs.
State aid is generally forbidden in EU law, but in 2007 tax breaks for game developers were recognised as an exception until 2012.
European Commission directorate general for compeition, Wouter Pieke, is now required to approve a reintroduction of the measure, but Develop sources indicate there's "genuine concern" the EU will opt not to reintroduce the tax break.
According to the source the issues officials are facing is whether the benefits can give development companies in one state an unfair advantage over others. Compounding that issue is the French government's budgetary crisis.
Developers in other EU states and the UK risk losing any chance of game tax breaks unless the original exemption is extended.
Quantic Dreams, the studio behind Heavy Rain, has reportedly indicated that it is likely to transfer resources to Canada should the tax break ban become permanent.
"The abandonment of this flagship measure, which brings hope to a large number of European studios and which has demonstrated its effectiveness in France, would be an historic mistake," said Guillaume de Fondaumiere, the co-CEO of Quantic Dream.
"We would like to point out that this French measure has not caused any distortion in competition within the EU," he wrote in a letter to Pieke.
The ban is likely to affect Ubisoft significantly; the developer and publisher moved a large portion of its development business into France specifically because of the tax breaks, a fact which Fondaumiere pointed out.
"Ubisoft has relocated some of its production activities back to France between 2008 and 2011 - a step they clearly attributed to the video game tax credit," he said.
The UK games industry has battled for tax breaks for several years, but is said to be losing large numbers of workers to Canada.