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The Taxation Risk and Social Responsibility of Cultural Industry after It Goes Public
During the process of IPO and after IPO, cultural and media companies making a good control and arrangement of the tax costs of the company is an important part of the operation and management of cultural enterprises. The common taxation risk is as follows:
The basis of reducing the taxation risk is to perfect the financial system, and to establish modern financial system is more urgent especially for the cultural company reformed from public welfare enterprise owned and operated by state. Simultaneously, after the cultural company makes IPO, it become a public company, so it shall adjust the operation strategy such as development theory of company, product service ,investment direction, and the business operation shall be in coincidence with national industry policy, core value system of nation, and pubic expectation, and balance the economic return and social benefit.
The foundation of reducing taxation risk is to establish modern financial system.
For the cultural company after restructuring, a prerequisite of reducing taxation risk is to establish modern financial accounting system. The accounting systems and principles adopted by our country’s company are different because of the difference in type and scale of company. For small scale companies, currently they will adopt the Small Scale Company Accounting System issued in 2004, and according to latest regulationa in Cai Kuai (2011) No.17, from Jan 1st 2013, the small scale company will adopt Small Scale Company Principle. Most of the public welfare enterprise will adopt Public Welfare Enterprise system being effective from Jan 1st 1998, compared with company’s accounting system, there is simplicity in installment of accounting account, accounting recognition and measurement for the public welfare enterprise, and the requirement for the standard of accounting information to the outside user is low.
For the public company, they are required by relevant authority to strictly adopt the Enterprise Accounting Principle being into effect from Jan 1st 2007. There are many drawbacks for the public welfare enterprise accounting system compared with enterprise accounting principle, for example:
So the cultural company shall reconstruct the financial system and establish modern accounting system in reform and IPO. The main job contains:
First, organize financial department of company. It may introduce general accountant system, to organize and lead the financial management, cost management, budget management, accounting calculation and accounting supervision of this company. Simultaneously, based on the scale and operation model of the company, set the accounting post of treasurer, salary calculation, cost, revenue and profit in scientific way.
Second, to set accounting accounts according to Enterprise Accounting Principle and to recognize and measure accounting information according to accounting principle. Transformed entity shall organize financial staff to study latest accounting principle, and at the same time, it shall actively introduce accounting computerization system.
The taxation preferential policy for cultural company during reform
The state council issued The Notice Concerning Issuing Two Regulation of Operational Cultural Public Welfare Enterprise Transformed to Company During Culture System Reform and Supporting the Development of Culture Enterprise. In order to implement the notice, relevant department gradually issued two taxation document Cai Shui  Nu 31, Cai Shui  Nu 34, No 34 document explicitly regulates the taxation preferential policy of reform company.
According to Cai Shui  Nu 34, from Jan 1st 2009 to Dec 31th 2012, the reform of operational culture public welfare enterprise can enjoy the following preferential:
According to Cai Shui  Nu 34 and Cai Shui  Nu 105, the transformed culture company enjoying the above taxation preferential policy shall satisfy the following requirements:
In addition, after culture enterprise reform and go public, it can also enjoy tax preferential policy of relevant concrete industry. Mainly include: newspaper publishing, video television, software internet, advertisement exhibition and design service. In addition to the requirement of independent calculation in finance, it has a lot of compliance request and filing obligation. For example, with regard to relevant stipulation for culture new and high technology: in such field as technology supported by culture industry, the company recognized by the regulation of (Guo Ke Fa Huo  No 172) and (Guo Ke Fa Huo  No 362) to be new and high technology company, will be imposed corporate income tax on taxation rate of 15%. If the culture company wants to enjoy the preferential policy of 15%, it shall provide material in six field including core self-developed intellectual property, new and high technology income, research and development expense, it shall also fulfill the obligation of filing in department of taxation and technology.
In the severe taxation inspection situation, we shall make a good taxation arrangement.
Under the background of lower the expected economy development speed, the tax authority surely will intensify the tax inspection in order to fulfill the taxation collection purpose. According to Ji Bian Han  No1 The emphasis of National Taxation Inspection in 2012, capital transaction is listed as directory item in special taxation inspection. During the process of IPO and after IPO, capital transaction faces rigor tax inspection risk, taxation risk exit everywhere, relevant company shall pay enough attention.
Take the favored IPO of current culture media company, the potential taxation risk concentrates on the following several part:
First: Historical taxation problem. If the historical taxation problem is not properly dealt with, the IPO taxation cost will surely be increased. So the company applying for IPO shall actively make efficient communication with relevant taxation authority, if needed, it may apply for approval for tax authority to clarify the treatment of taxation problem, and solve the taxation problem as soon as possible.
Second, the taxation problem in restructure. The company usually need to make restructure in stock holding structure and business operation model. During the process of restructure, company usually face the taxation problem of “whether it is more efficient in the arrangement of controlling shareholding structure in IPO” “whether the business model of restructure will bring new taxation cost” “whether it make the transfer price problem of related transaction more serious”.
Third, taxation reliance. Administrative Measures of Initial Public Offering and Listing of Shares clearly indicates that “the operating results of issuer shall not have heavy reliance on the taxation preferential”. In the practice, if the taxation preferential account for more than 20% of average profit, it will constitute heavy taxation reliance, at the same time it is an absolute obstacle of IPO. Currently, during the inspection to the taxation related problem by the supervision department, taxation reliance has been an very important part.
After the culture company successfully IPO, no matter vertical or horizontal expansion, or through merger and acquisition or domestic investment, it all face big capital transfer, this will involve business tax VAT income tax land appreciation tax deed tax and stamp tax. If it is not properly dealt with, it will assume big taxation cost, this require the culture company in make thorough taxation plan after it go public.
The culture company shall take fulfilling social responsibility into corporate governance.
Recently culture company receive high emphasis, on one hand this come from the need of industry adjustment and develop new economy, on the other hand, it come from the need of cultivate the spiritual civilization of socialism.
First, cultural company shall include social responsibility into the corporate administration theory.
Second, the product operation of cultural company shall be in conformity with nation’s core value system.