Global

Details

  • Service: Tax, Global Indirect Tax, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 12/28/2012

China - Determining “culture business development levy” after VAT reform 

December 28:  China’s authorities issued guidance to clarify how to determine the taxable base for purposes of the “culture business development levy” in light of the value added tax (VAT) reform pilot program in China.

Under the VAT pilot program, China’s business tax is replaced by a VAT. However, the “culture business development levy” (CBDL) is computed as 3% of the business tax revenue from advertising or entertainment businesses. Thus, it has been uncertain for taxpayers and some local tax bureaus as how to calculate the CBDL in areas where the VAT pilot program applies.


Circular No. 68 was issued in August 2012 and then, more recently, Circular No. 96 was issued in early December 2012 to clarify how to determine the taxable base of the CBDL in light of the VAT reform. With this guidance, the following general rules apply:


  • Taxpayers are to use sales revenue (inclusive of VAT) as the calculation base of the CBDL.
  • It is permissible to use net revenue after the deduction of advertising placement expenses as the calculation base.
  • The administration and collection authority of the CBDL changes from the local tax bureaus to the state tax bureaus after the VAT reform.

KPMG observation

Tax professionals in China observe that taxpayers who have settled their CBDL liability based on verbal confirmations from the in-charge local tax bureau may need to consider: (1) re-calculating the amount of CBDL payable; (2) settling the payments to the state tax bureau in charge; and (3) applying for a refund from the local tax bureau.


Read a December 2012 report [PDF 319 KB] prepared by by the KPMG member firms in China and Hong Kong: Culture Business Development Levy (CBDL) regulations after VAT reform further clarified




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