Monday, November 23, 2009

China grants tax preferential policy to comic and animation industry

China's Ministry of Finance and the State Administration of Taxation have jointly issued the taxation policy to support development of comic and animation industry on July 31, 2009, stressing the priority of the supportive policy is given to independent innovation capacity of domestic comic and animation enterprises. According to the policy, starting from 2009, domestic comic and animation companies are granted with preferential tax treatment covering VAT, corporate income tax, business tax, import duties and import linkage VAT.

According to a circular on taxation policy on supporting development of comic and animation industry jointly issued by the above two departments. Before December 31, 2010, China will apply the 17% VAT rate to ordinary tax payers in the industry which sell self-developed and -produced comic and animation software, but the part of actual tax burden which exceeds 3% will be refunded upon collection. At the same time, exports of comic and animation software are exempted of VAT. Self-developed and self-produced comic and animation products of enterprises verified as comic and animation enterprises will also be entitled to apply for the income tax preference. Businesses in the comic and animation production chain, such as script writing, image, background, animation and story board designing, producing, shooting, drawing, coloring, picture synthesizing, dubbing, sound effect synthesizing, subtitling, compressing and code transforming, will enjoy the 3% business tax rate by tax reduction on the temporary basis before December 31, 2010. Enterprises approved by related departments of the State Council as comic and animation enterprises are exempted of import duties and import linkage VAT on products really needed for self-developed and –produced comic and animation direct products.

The verification standards and procedure of comic and animation enterprises granted with preferential tax treatment and self-developed and –produced comic and animation products shall be implemented according to the Administration Measures on Verification of Comic and Animation Enterprises (for trial operation) issued by the Ministry of Culture and other departments concerned in December 2008.

Indicators show that comic and animation industry will be taken as an important part of China's development of cultural industry. China's comic and animation industry has achieved rapid development in recent years. The number of enterprises with comic and animation as main operation and simultaneous business has exceeded 10,000, and quantity of such products increased a lot. Statistics indicate that by the end of 2007, China had more than 5,400 comic and animation research and development institutions, and comic and animation film length surged ten times from 2003 to 2007 to reach 100,000 minutes. China produced 249 comic and animation TV films in 2008 with a total length of 131,042 minutes, rising 28% year on year, and the output value of the comic and animation industry exceeded RMB18.0 billion.

However, there still exist problems which shall not be ignored in development of China's comic and animation industry, mainly including poor quality of comic and animation products, lack of leading enterprises with large scale, high level and complete production chain, small economic scale of the industry, weak development of original works and lack of complete production chain of comic and animation enterprises. At present, China's development mode of comic and animation industry is limited to “policy-booster type” and “financial subsidy type”, comic and animation products have low cognitive ratio, and the fund yield ratio is also low. Among a big number of prize winners at the fourth international comic and animation festival held last year, each had investment costs of more than RMB10 million, but the best box office works amounted to only about RMB6 million. Statistics show that China now has 447 universities having comic and animation major, and 1,200 colleges having majors relating with comic and animation, with students of 100,000. However, the comic and animation industry requires special specialist-type employees with sound theoretic quality and rich operation experience, which need good foundation of literature and overall art expression. The traditional training mode can hardly satisfy the real needs of the country's annual output of 180-odd comic and animation films. Currently, shortage of talents or expertise is a fatal factor restraining the quality upgrading of China's comic and animation products. Chinese enterprises lack core competitiveness in the comic and animation industry which stresses the “content is the king”.

By Li Xin