China's Provisional Regulations on Import-Tax Exemption for Certified Cartoon/Animation Enterprises

1. These Regulations are hereby formulated in accordance with China's State Council's principle of exempting import tariffs and value-added taxes on import goods required for independent development or production of direct cartoon/animation products by the State-Council-identified cartoon/animation enterprises.

2. The cartoon/animation enterprises identified by the State Council shall be in compliance with the following criteria:

(1) In line with basic identification standards for cartoon/animation enterprises set forth in the Notice of the Ministry of Culture of China on Issuing the Administrative Measures (Provisional) on Identification of Cartoon/Animation Enterprises (WenShiFa [2008] No. 51);

(2) Possessing the quality and capability to conduct independent development and production of direct cartoon/animation products;

(3) Possessing the registered capital of NO Less Than RMB 800,000.

3. The direct cartoon/animation products herein include:

(1) Comics: single-frame or multi-frame comics, insets, comic books, frame-caught animation books, comic newspapers/periodicals, original comic paintings, and so on;

(2) Animations: animated movies, TV plays, short films, and audio/video products, animated segments in special movie/TV effects or in technical, military, meteorological, and medical movie/TV programs, and so on;

(3) Web-based Cartoons/Animations (incl. those for cellphones): cartoon/animation works including FLASH animations, web-based countenances, and those for cellphones, disseminated through informational network platforms as computer Internet and mobile communication networks and received by terminals as computers, cellphones and other hand-held electronic devices.

4. Any enterprises in line with conditions of Article 2 aforesaid shall make application to the Ministry of Culture of China NO later than the end of March each year for obtaining their import-tax exemption.

Eligibility for the exemption shall go through joint verification by the Ministry of Culture together with the Ministry of Finance of China, the General Administration of Customs of China, and the State Administration of Taxation of China.

After the verification, the four authorities aforesaid may jointly release a list of cartoon/animation enterprises granted with import-tax preferences and indicate in the awarded "Certificate for Cartoon/Animation Enterprises" whether the enterprise concerned is granted with the import-tax exemption herein.

Annual examination system shall be applied to any eligible cartoon/animation enterprise for such import-tax exemption. The Ministry of Culture may be directly in charge of the annual examination, affixing the special seal for annual examination to the Certificate aforesaid awarded to any eligible enterprise.

Where any cartoon/animation enterprise fails to apply for annual examination or fails the examination, its eligibility for the import-tax exemption shall automatically become invalid upon expiry.

5. Any eligible cartoon/animation enterprise shall, based upon the "Certificate for Cartoon/Animation Enterprises" valid this year and the indication therein of its eligibility for the import-tax exemption, apply to competent customs authority for conducting the formalities relevant to the exemption enjoyment.

The exemption from import tariffs and value-added taxes may be applied to importation of goods within the List of Tax-Free Goods Imported by Cartoon/Animation Enterprises for Cartoon/Animation Development & Production (Annexed herein) within the period of validity this year.

The List aforesaid may be duly adjusted by the Ministry of Finance with other relevant authorities. China Customs may resort to product descriptions and technical indicators provided therein when verifying the tax exemption for importation of any listed goods.

6. Any eligible cartoon/animation enterprise shall report to the Department of Cultural Industries under the Ministry of Culture the goods actually tax-free imported, their quantity and value, and any projects concerned in a previous year NO later than the end of February each year;

And the Department of Cultural Industries may report such information to the Department of Customs Tariffs under the Ministry of Finance, meanwhile copying to the Department of Duty Collection under the General Administration of Customs and to the Department of Goods & Services Taxes under the State Administration of Taxation.

7. Any tax-free imported goods, used for independent development and production of direct cartoon/animation products, shall NOT be used for any mortgage, pledge, transfer or for other purposes NOR be put to any disposal, WITHOUT prior approval by China Customs.

Any eligible cartoon/animation enterprise, where evidenced of obtaining the exemption by any false declaration, illegally transferring tax-free goods, dodging any taxes and cheating out of any tax rebates, or of committing other unlawful acts, shall be revoked of its eligibility for the import-tax exemption and be announced to the public.

8. These Provisional Regulations are hereby determined to be valid and effective from January 1, 2011 till December 31, 2015.

Annex: List of Tax-Free Goods Imported by Cartoon/Animation Enterprises for Cartoon/Animation Development & Production