China Releases Circular on Cultural Undertaking Development Fee in VAT Pilot Reform

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Sept. 14 – China’s State Administration of Taxation (SAT) and the Ministry of Finance (MOF) jointly released the “Circular on Issues Concerning the Collection of Cultural Undertaking Development Fee (‘CUD Fee’) in the Business Tax (BT) to Value-Added Tax (VAT) Pilot Conversion Program (caizong [2012] No. 68, hereinafter referred to as the ‘Circular’)” on August 29, which is effective retroactively from January 1, 2012. Provisions of the Circular are listed below.

  • Entities and individuals providing advertising services which originally paid CUD Fee according to the “Interim Measures for Administration on Collection of CUD Fee (caishuizi [1997] No. 95),” as well as those which are established in pilot regions after the launch of the pilot program and included in the scope of the program, should pay CUD Fee according to the provisions in this Circular.
  • The amount of CUD Fee payable is calculated based on the sales amount obtained from provision of VAT taxable service and a payment rate of 3 percent. The fees will be collected by SAT together with VAT. The calculation formula is:

Amount of CUD Fee payable = sales amount x 3 percent

  • The obligation to pay CUD Fee arises at the same time as the obligation to pay VAT; the place for paying CUD Fee is the same as that for paying VAT.
  • The deadline for paying CUD Fee is the same as that for paying VAT, or determined by the competent tax authorities in accordance with the amount of the CUD Fee payable.
  • Withholding agents who bear the relevant VAT withholding obligation under the “Notice on Measures for Implementing the BT to VAT Conversion Pilot in the Transportation and Certain Modern Services Industries (caishui [2011] No. 11)” should withhold the CUD Fee according to the provisions under this Circular.
  • Other matters related to CUD Fees should be carried out according to the relevant provisions under the Measures.

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