China records decline in new entertainment companies as Beijing clamps down on industry

Following actress Fan Bingbing’s tax evasion case, Chinese authorities began to look closer at entertainers’ taxes, and places with preferential tax policies. — Picture via Instagram

Follow us on Instagram and subscribe to our Telegram channel for the latest updates.

KUALA LUMPUR, Sept 14 — Some 700 companies related to Chinese celebrities have closed since early this year as Beijing moves in to clean up China’s entertainment industry.

Citing data from Chinese corporate database Tianyancha, Global Times reported that there was a 278 percent decline in new entertainment companies registered in the country compared with the same period last year.

This, as experts called for stricter taxation mechanisms to prevent celebrities from evading taxes by exploiting advantages under local preferential policies.

Citing actress Zheng Shuang, who was ordered to pay 299 million yuan (RM192.3 million) in fines, taxes and penalties for tax evasion as an example, Tianyancha said Zheng had registered one company and six studios but four of the studios had since been closed down.

Celebrities prefer to open studios than companies in China as the country charges lower tax rates for the former. 

A star has to pay 25 per cent tax for company income tax and another 45 per cent for individual income tax if he or she receives more than 960,000 yuan (RM618,062) for a performance.

Meanwhile, the tax rate in China for a studio is at most 35 per cent for operating income — and the star who owns the studio does not need to pay personal individual tax.

Many places in China also offer tax breaks to studios of celebrities to attract investments. 

Hence, many celebrities register their studios in small places with preferential tax policies such as “Chinese Hollywood” —Hengdian in East China’s Zhejiang Province — or Wuxi in Jiangsu and the border port Horgos in Northwest China’s Xinjiang Uygur Autonomous Region.  

Following the tax evasion case involving actress Fan Bingbing, authorities began to scrutinise entertainers’ taxes, and places with preferential tax policies.

Renmin University of China’s Institute of Business Law director Liu Junhai told Global Times that providing tax breaks to studios of celebrities through tax refunds violates the national tax law.