China Specifies Preferential Tax Policies for Animation Industry

Posted by Reading Time: 3 minutes

10268_P_1292762653024 (300x236)Jan. 7 – To encourage and support the development of China’s animation industry, the Ministry of Finance (MOF) and  State Administration of Taxation (SAT) jointly disseminated the “Notice Concerning Value-Added Tax (VAT) and Business Tax (BT) Policies of Animation Industry” (Caishui [2013] No. 98, hereinafter referred to as “Circular 98”) in November, 2013. Circular 98 clarifies the preferential VAT and BT policies as they apply to animation enterprises, beginning retrospectively on January 1, 2013.

Preferential VAT Policies

Generally, animation enterprises are subject to a 17 percent VAT rate for the domestic sale of self-developed and manufactured animation software. Circular 98 stipulates that VAT in excess of 3 percent will enjoy an instant VAT refund. The export of animation software is also VAT exempted.

These policies are effective from January 1, 2013 to December 31, 2017.

Preferential Business Tax Policies

A 3 percent business tax (BT) rate applies to animation enterprises providing the following services:

  • Animation script compilation
  • Image design
  • Background design
  • Animation design
  • Storyboard
  • Animation production
  • Filming
  • Depicting
  • Coloring
  • Image synthesis
  • Dubbing
  • Background music
  • Sound synthesis
  • Film editing
  • Subtitle production
  • Compressing services
  • Transcoding services (for the adaption of animation on internet and cellphone)
  • Domestic transfer of animation copyright (including the authorization and reauthorization of the brand, image, or content of the animation)

To take advantage of the policy changes, animation enterprises should also be registered in Hebei, Shanxi, Inner Mongolia, Liaoning (including Dalian), Jilin, Heilongjiang, Jiangxi, Shandong (including Qingdao), Henan, Hunan, Guangxi, Hainan, Chongqing, Sichuan, Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Qinghai, Ningxia or Xinjiang.

The preferential BT policies are only effective from January 1, 2013 to July 31, 2013 because the national adoption of  VAT pilot collection in lieu of BT has been implemented since August 1, 2013, and providing the services mentioned above is now subject to VAT instead of BT. Circular 98 explains that relevant preferential policies for pilot VAT taxpayers will be further released.

Animation enterprises should seek confirmation on their eligibility from the local office of the Ministry of Culture as a preliminary requirement for enjoying the preferential tax policies.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.

For further details or to contact the firm, please email, visit, or download the company brochure.

You can stay up to date with the latest business and investment trends across China by subscribing to Asia Briefing’s complimentary update service featuring news, commentary, guides, and multimedia resources.

Related Reading

China-Tax-Guide-2013-thmbThe China Tax Guide: Tax, Accounting and Audit (Sixth Edition)
This edition of the China Tax Guide, updated for 2013, offers a comprehensive overview of the major taxes foreign investors are likely to encounter when establishing or operating a business in China, as well as other tax-relevant obligations. This concise, detailed, yet pragmatic guide is ideal for CFOs, compliance officers and heads of accounting who need to be able to navigate the complex tax and accounting landscape in China in order to effectively manage and strategically plan their China operations.

Value-Added Tax Reform
VAT reform is a confusing transition for many and introduces a number of additional questions, such as exactly what types of input VAT are now deductible. Confusion about the new laws may also allow opportunistic companies to charge higher prices and blame the increase on the tax reform. To add some clarity to the issue – and VAT in general – this issue of China Briefing takes a look at a number of VAT-related questions.

China Clarifies VAT General Taxpayer Recognition Under Nationwide Tax Reform

China Releases Tax Policies for Nationwide VAT Pilot Reform Adoption

China to Expand VAT Reform Nationwide Starting August 1, 2013

MOF, SAT Interview on China Tax Reforms

China Issues Announcement on Value-added Tax Declaration

Beijing Issued Announcement on VAT Preferential Policy Administration