China Clarifies Collection of Cultural Undertaking Development Fee under Nationwide Tax Reform

September 5, 2013 Posted by China Briefing Reading Time: 3 minutes

Sept. 5 – China’s Ministry of Finance and the State Administration of Taxation jointly issued the “Circular on Issues Concerning the Administration and Collection of the Cultural Undertaking Development Fee under the Business Tax (BT) to Value-added Tax (VAT) Pilot Conversion (caizong [2013] No. 88, hereinafter referred to as the ‘Circular’)” on August 29, which specifies that entities and individuals providing advertising services in China shall pay the cultural undertaking development fee (CUD Fee) in accordance with the Circular. Detailed information can be found below.

According to the Circular, for overseas entities and individuals that provide advertising services in China, but have not set up any operation organization in the country, their advertising agents shall be the withholding agents for the CUD Fee.

However, if such entities and individuals do not have any advertising agents in China, the party receiving the advertising service shall be the withholding agent for the CUD Fee.

The amount of the CUD Fee payable for entities and individuals providing advertising services in China shall be calculated based on the sales amount obtained from the provision of advertising services and a payment rate of 3 percent. The calculation formula is:

Amount of CUD Fee payable = Sales amount x 3 percent

The sales amount shall be the balance of the total price and additional charges received by taxpayers from the provision of advertising services after deducting the advertising fees paid to other advertising companies and advertising publishers.

The obligation to pay the CUD Fee arises at the same time as the obligation to pay VAT, and the place for paying the CUD Fee is the same as that for paying VAT. Moreover, the deadline for paying the CUD Fee is the same as that for paying VAT.

Exemption
The Circular provides that any individual whose taxable service fails to reach the VAT threshold is exempted from the CUD Fee; and among the small-scale VAT taxpayers, any enterprises or non-enterprise entities with monthly sales amounts of not more than RMB20,000 (the quarterly tax payment amount of RMB60,000) may be exempt from the CUD Fee.

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 china@dezshira.com, visit www.dezshira.com, 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

The 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.