Notice on Preferential Corporate Income Tax Policy of Hainan Free Trade Port
CS (2020) No 31
Department of Finance of Hainan Province, Hainan Provincial Tax Service, State Taxation Administration,
For the purpose of supporting the construction of Hainan Free Trade Port, it is hereby notified of relevant preferential corporate income tax policies as follows:
I. The corporate income tax on enterprises in encouraged industries which are registered and conduct practical operations in Hainan Free Trade Port shall be levied at a reduced tax rate of 15%.
For the purpose of this article, “enterprise in an encouraged industry” means an enterprise whose main business is within the scope of industry projects set out in the Catalogue of Encouraged Industries in Hainan Free Trade Port and whose income from its main business accounts for more than 60% of its gross income. “Practical operation” means that the actual management institution of the enterprise is located in Hainan Free Trade Port, and conducts substantial and all-round management and control with respect to the production, operations, personnel, accounting, and property, among others, of the enterprise. An enterprise failing to meet the requirements for conducting substantial operation may not enjoy preferences.
The catalogue of encouraged industries for Hainan Free Trade Port consists of the Guidance Catalogue for the Adjustment of Industrial Structure (2019 Edition), the Catalogue of Encouraged Foreign Investment Industries (2019 Edition) and the Catalogue of Newly Added Encouraged Industries in Hainan Free Trade Port. Should any of the mentioned catalogue be revised within the period of implementation of this notice, the new version shall prevail as of the date of implementation of the revised version.
For qualified enterprises with their headquarters based in Hainan Free Trade Port, the 15% tax rate is applicable only to the income of their headquarters and branches in the Hainan Free Trade Port; For enterprises whose headquarters are outside of Hainan Free Trade Port, the 15% tax rate is applicable only to the income of the qualified branches set up in Hainan Free Trade Port. Specific collection and management measures shall be implemented in accordance with relevant regulations of the State Taxation Administration.
II. For tourism, modern service and high-tech industries, enterprises established in Hainan Free Trade Port are entitled to corporate tax exemption for income from new overseas direct investment.
Income from new overseas direct investment shall meet the following conditions:
(i) The operational revenue from newly established overseas branches, or dividend income corresponding to new direct investment from overseas subsidiaries with a 20% plus (inclusive) equity held by the parent company.
(ii) The legal tax rate for corporate income tax in the destination country (region) shall not be less than 5%.
The terms “tourism,” “modern service industry,” and “high-tech industry” mentioned in this article shall be subject to the catalogue of encouraged industries for Hainan Free Trade Port.
III. For enterprises established in Hainan Free Trade Port, if the unit value of newly purchased (including self-built and self-developed) fixed assets or intangible assets does not exceed RMB 5 million (inclusive), it is allowed to be included in the current cost and fully deducted at one time when calculating the taxable income, with no necessity to be depreciated and amortized at an annual term; if the unit value of newly purchased (including self-built and self-developed) fixed assets or intangible assets exceeds RMB 5 million, the depreciation and amortization period could be shortened or the accelerated depreciation or amortization approach could be adopted.
The term "fixed assets" as mentioned in this article refers to fixed assets other than houses and buildings.
IV. The notice shall be implemented from January 1, 2020 to December 31, 2024.
Ministry of Finance, State Taxation Administration
June 23, 2020
