China Extends Publicity and Culture Tax Relief: Publishing VAT First, Refund Later Through 2017

For the traditional printing and publishing sector, 2013 brought plenty of uncertainty; even so, the Notice on Extending the Preferential VAT and Business Tax Policies for Publicity and Culture added a measure of warmth to what many described as a harsh winter.

Known within the industry as a New Year gift package for news and publishing, the notice has been formally released by the Ministry of Finance and the State Administration of Taxation. It provides that preferential VAT and business tax policies for publicity and cultural undertakings will continue, after appropriate adjustments, until the end of 2017.

Under the notice, from January 1, 2013 to December 31, 2017, the publishing stage applies two first-levy-then-refund VAT models: one refunds 100% of VAT collected, and the other refunds 50%. Book wholesale and retail are exempt from VAT. Business tax is waived on ticket revenue of science-popularization units and on ticket revenue from science-popularization activities organized by Party and government departments at or above the county level (including county-level cities, districts, and banners) and by science and technology associations. From January 1, 2013 to July 31, 2013, business tax is also exempt on income earned by overseas entities from transferring broadcasting rights for science-popularization film and television works to domestic science-popularization units.

At the publishing stage, the 100% first-levy-then-refund VAT policy applies to: official newspapers and periodicals of organizations at all levels of the Communist Party of China and the democratic parties; official newspapers and periodicals of people's congresses, CPPCC committees, governments, trade unions, Communist Youth Leagues, women's federations, disabled persons' federations, and science and technology associations at all levels; official newspapers and periodicals of Xinhua News Agency; and official newspapers and periodicals of military departments.

The same 100% treatment also covers newspapers and periodicals published specifically for children and youth, student textbooks for primary and secondary schools, newspapers and periodicals for the elderly, publications in ethnic minority languages, Braille books and periodicals, and publications from publishing units approved and registered in the five autonomous regions of Inner Mongolia, Guangxi, Tibet, Ningxia, and Xinjiang. It further includes 17 specified books, newspapers, and periodicals such as Banyue Tan, Legal Daily, and Chinese-language teaching materials (including multimedia materials) compiled under the Overseas Chinese Affairs Office of the State Council, whose back covers carry the line 'This book is presented free of charge by the Overseas Chinese Affairs Office of the State Council to promote overseas Chinese-language education.' The 100% first-levy-then-refund policy also applies to printing or production of ethnic minority language publications and to printing operations of printing enterprises in the Xinjiang Uygur Autonomous Region.

For newspapers eligible for the 50% first-levy-then-refund VAT policy at the publishing stage, the notice provides a list. Comprehensive newspapers such as current-affairs and external-publicity newspapers, economic newspapers, news and publishing newspapers, and industry-specific professional newspapers in 10 fields, including industrial newspapers, fall within the policy scope.

The notice makes clear that taxpayers receiving the first-levy-then-refund VAT benefit must be publishing units holding the relevant publication publishing license, including publishing units that have obtained exclusive publishing rights by way of plate leasing for printing and distributing publications. Units assigned publishing and distribution tasks by publishing administrative departments at or above the provincial level, and publishing units that have not yet completed publishing and distribution licensing because of restructuring or reorganization, may receive the corresponding first-levy-then-refund VAT treatment after approval by the Ministry of Finance's local financial supervision commissioner offices in consultation with provincial publishing administrative departments.

Taxpayers are required to keep separate financial accounts for publications that enjoy these tax incentives; without separate accounting, the preferential treatment cannot be claimed. Publications that violate rules, publishing units that violate rules repeatedly, and book wholesale and retail units with repeated violations are excluded from the notice's incentives. The specific lists of such violating publications, publishing units, and book wholesale and retail units are to be promptly notified by publishing administrative departments at or above the provincial level to the relevant financial supervision commissioner offices and competent tax authorities. Electronic publications that already enjoy a VAT refund as software products may not apply for the first-levy-then-refund VAT policy under this notice.

The notice took effect on January 1, 2013, and the Notice of the Ministry of Finance and the State Administration of Taxation on Continuing the Preferential VAT and Business Tax Policies for Publicity and Culture (Cai Shui [2011] No. 92) was repealed at the same time. Taxes already collected and turned over before the notice was received may offset the taxpayer's future VAT and business tax liabilities or be refunded. If a taxpayer has already issued special VAT invoices to a buyer, those invoices must be recovered before applying for tax exemption; if they cannot be recovered, VAT is to be collected in accordance with the rules.

——This article is reprinted from China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-361821.html