15 Aug 2013

Foreign film tax dispute resolved in China

8:49 am on 15 August 2013

Hollywood studios have reached a deal with China over a tax dispute on foreign films, including some of the year's biggest box office hits.

Payments had stopped due to a dispute over a new 2% tax. The Motion Picture Association of America says the Chinese government has now intervened in the dispute and payments have resumed.

The BBC reports the money was being withheld by the China Film Group, a state-owned distributor which oversees the release of foreign films in China.

It wanted to deduct a new 2% value added tax from what the studios earned in ticket sales.

The US studios argued that the tax violated World Trade Organisation rules, which state they should receive 25% of Chinese box office revenue, with no deductions.

The Hollywood Reporter said film companies had not been paid since October or November and estimated they were owed close to $US200 million.

According to the Motion Picture Association of America, China's box office revenues increased by 36% to $US2.7 billion in 2012.

Under the WTO deal, the number of foreign films allowed to be screened in China is 34. In return, the BBC reports foreign studios receive a 25% share of box-office takings, up from between 13% - 17%.