More than 2,200 new film and TV companies have opened in Hainan to enjoy low tax benefits
The rise in film and TV companies opened by celebrities, such as actors Wang Yibo and Shen Teng, in South China’s Hainan Province has attracted the attention of Chinese social media after more than 75 Chinese stars closed their studios early in May. According to reports, more than 2,200 studios have been opened in the province since June 2020.
Entrepreneurs opening film and TV companies in the province has not been limited to celebrities, but also includes giant enterprises in the entertainment industry such as iQIYI, Sina News reported.
According to law experts, these companies have been heading to Hainan to enjoy the low tax benefits there.
“The reason that so many Chinese stars are setting up work studios in Hainan Province is because they can enjoy tax policy benefits. They could only need to pay 15 percent of taxable income while a normal company income tax rate is 25 percent,” Zhou Xianbao, a lawyer based in Beijing who specializes in tax law, told the Global Times on Monday.
“Celebrities can continuously transfer their high-paid salaries by making use of the complicated legal relationship between a work studio and other registered companies and shareholding companies that are under the celebrity’s name until the taxes due are at a very low point or even zero,” said Wu Xiaolin, a lawyer based in Shenzhen.
Some netizens said that enjoying the benefits of low tax rates is different from tax evasion cases like the one involving Chinese actress Fan Bingbing, who was charged in 2018.
“It is normal for investors to want to pay lower taxes and as long as they operate within the law, it is their freedom to choose where they set up a company,” one netizen commented on China’s Twitter-like Sina Weibo.
However, Zhou pointed that Hainan Province will not become a second “Horgos.” Horgos, a small city in Northwest China’s Xinjiang Uygur Autonomous Region, was once a “tax haven” for domestic entertainment companies since the city offered favorable policies such as huge tax breaks to attract cultural and entertainment companies.
“Compared with Horgos in Xinjiang, where entertainment companies only needed to register, the work studios registered in Hainan also need to operate and earn a profit in Hainan.”
Meanwhile, the tax policy in Hainan clearly contains anti-tax avoidance clauses, that is, the authorities will assess companies’ taxation behavior based on the company’s actual economic activities and its value creation to prevent tax base erosion and profit shifting, according to Zhou.
The issue of celebrities’ high income and taxes became a focus on social media again after it was revealed that actress Zheng Shuang, who had been in the news for earning 160 million yuan ($24.62 million) for a television role, and the company registered under her name were under investigation for the tax evasion.
Hainan is becoming not only a new “heaven” for investors and celebrities to set up companies, but also a gathering place for internet celebrities and many vloggers, giving it a reputation as an “incubation base for internet celebrities.”
A photo that has recently gone viral on social media shows a large number of vloggers jammed together on a beach in Hainan as they try to shoot videos of themselves with their mobile phones.