China to pay Hollywood studios millions in owed taxes

LOS ANGELES (AFP) - China will pay major Hollywood studios tens of millions of dollars in owed local box office revenues following the resolution of a tax row, the studios said on Tuesday.

State-owned China Film Group stopped payment at the beginning of the year, when American studios took issue with a two per cent value-added tax that the world's most populous nation was levying on US films.

The affected US studios include Sony, Warner, Fox, Disney, Paramount and Universal.

In a statement, the Motion Picture Association of America, which represents the studios, signaled an agreement had been reached.

"The MPAA understands that the China Film Group stopped payments owed to MPAA studios in China pending resolution of the application of a new value-added tax (VAT) due to be implemented nationwide as of August 1," it said.

"We are pleased to hear that the Chinese government has addressed the matter and all money due will be paid in full. It is our understanding that the payment process has recommenced."

According to The Hollywood Reporter, CFG owed more than US$31 million (S$39 million) to Warner for "Man of Steel," US$23 million to Sony for "Skyfall" and US$23 million to Fox for "Life of Pi."

The US studios argued the tax violated a trade agreement governing the film trade between the two countries.

Under the terms of that accord, heralded as historic, the number of US films that can be distributed in China per year was increased to 34 from 20.

The studios' revenue share from China was fixed at 25 per cent (up from 13 to 17 percent).