China Box Office Repayment Guidelines Revealed

3:14 PM PST 08/14/2013 by Pamela McClintock
Warner Bros. Pictures
"Man of Steel"

Hollywood hasn't received any money since last fall from the China Film Group because of a dispute over who should bear the cost of a new 2 percent luxury tax.

Hollywood studios have been informed that they will receive four payments from the China Film Group for all box-office money owed to them for movies released before the end of June.

The details of the repayment plan were revealed to the studios by the MPAA on Tuesday, hours before MPAA chairman and CEO Christopher Dodd announced an end to the standoff between the China Film Group and Hollywood. According to those who were privy to the e-mail briefing, the first wave of payment is being remitted.

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The China Film Group has withheld box-office payments since last fall because of a new 2 percent luxury tax it wanted studios to cover. However, studios argued that would potentially violate a trade agreement mandating that studios receive 25 percent of Chinese box-office revenue, free and clear of any taxes.

Dodd and his team have been working furiously to resolve the issue, with Dodd himself traveling to China earlier this summer. MPAA officials were told late last week that payments were commencing after the State Administration of Press, Publication, Radio, Film and Television instructed the China Film Group to pay the money that was owed.

"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 due to be implemented nationwide as of Aug. 1. 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," Dodd said in his statement announcing a resolution to the matter.

"The U.S. and Chinese film industries enjoy a close and productive relationship, and the MPAA is grateful to our counterpart, the State Administration of Press, Publication, Radio, Film and Television for their commitment in resolving this matter favorably. We look forward to further strengthening our ties with SAPPRFT as the Chinese screen community continues its path to becoming a global powerhouse in the international entertainment market," he continued.

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Going by the 25 percent rule, Warner Bros. would be owed north of $31 million for Man of Steel, The Hobbit: An Unexpected Journey and Jack the Giant Slayer (Pacific Rim hasn't yet ended its run in China, but has earned a stellar $76.5 million to date); Sony would be due $23 million for Skyfall and After Earth (White House Down is still in the midst of its China run); Paramount would be owed roughly $30 million for Star Trek Into Darkness, G.I. Joe: Retaliation and Jack Reacher; Disney's Oz the Great and Powerful would mean about $5 million in payments (Monsters University is headed to China later this month).

Universal's Fast & Furious 6 has grossed north of $55 million to date in China. Universal also would be owed for Oblivion and Les Miserables, which took in $23.9 million and $10 million, respectively.

Some studios say they are due money from 2012 titles, as well. Fox hasn't received payment for Ang Lee's Life of Pi, a check that's expected to come in at $23 million.

In China, SAPPRFT is in talks with the country's tax bureau to waive the 2 percent luxury tax on theater tickets, and the issue is due to be tabled at the next meeting of the State Council, which is chaired by Premier Li Keqiang. The tax had previously been waived in a bid to boost the film business, but under changes in China's corporate tax law, the tax bureau insisted on a 2 percent withholding tax for all imported movies, similar to a 2 percent withholding tax that other foreign companies in China have to pay.

China trails the U.S. in terms of the size of the market, but with box-office grosses of roughly $2.75 billion last year, it is widely expected to assume the No. 1 spot within the next couple of years.

Clifford Coonan contributed to this report.

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