Notice on the preferential corporate income tax policy for Hainan Free Trade Port

Finance and Taxation [2020] No. 31

Hainan Provincial Department of Finance, State Administration of Taxation Hainan Provincial Taxation Bureau:
To support the construction of Hainan Free Trade Port, the following corporate income tax preferential policies are hereby notified:
1. For encouraged industrial enterprises registered in Hainan Free Trade Port and substantially operating, corporate income tax shall be levied at a reduced rate of 15%.
The encouraged industrial enterprises referred to in this article refer to enterprises whose main business is the industrial projects specified in the Hainan Free Trade Port Encouraged Industry Catalogue, and whose main business income accounts for more than 60% of the total enterprise income. The so-called substantial operation means that the actual management organization of the enterprise is located in Hainan Free Trade Port, and the enterprise's production and operation, personnel, accounts, property, etc. are substantially and comprehensively managed and controlled. Enterprises that do not meet the requirements of substantial operation shall not enjoy preferential treatment.
The Hainan Free Trade Port Encouraged Industry Catalogue includes the Guiding Catalogue for Industrial Structure Adjustment (2019 Edition) and the Catalogue of Industries Encouraged for Foreign Investment (2019 Edition) and the Catalogue of New Encouraged Industries in Hainan Free Trade Port. If the above catalogue is revised during the implementation period of this notice, the new version shall be implemented from the date of implementation of the revised version.
For qualified enterprises with their head offices located in Hainan Free Trade Port, only the income of their head offices and branches located in Hainan Free Trade Port shall be subject to a 15% tax rate; for enterprises with their head offices located outside Hainan Free Trade Port, only the income of their qualified branches located in Hainan Free Trade Port shall be subject to a 15% tax rate. The specific collection and management measures shall be implemented in accordance with the relevant regulations of the State Administration of Taxation.
II. The income obtained from new foreign direct investment of tourism, modern service and high-tech industry enterprises established in Hainan Free Trade Port shall be exempted from corporate income tax.
The new foreign direct investment income referred to in this article shall meet the following conditions:
(I) Operating profits obtained from newly established overseas branches; or dividend income corresponding to the new foreign direct investment distributed from overseas subsidiaries with a shareholding ratio of more than 20% (inclusive).
(II) The statutory corporate income tax rate of the invested country (region) shall not be less than 5%.
The tourism industry, modern service industry and high-tech industry referred to in this article shall be implemented in accordance with the catalogue of encouraged industries of Hainan Free Trade Port.
III. For enterprises established in Hainan Free Trade Port, newly purchased (including self-built and self-developed) fixed assets or intangible assets with a unit value of no more than 5 million yuan (inclusive) are allowed to be included in the current cost and expenses in a lump sum when calculating the taxable income, and depreciation and amortization shall no longer be calculated on an annual basis; newly purchased (including self-built and self-developed) fixed assets or intangible assets with a unit value of more than 5 million yuan may shorten the depreciation and amortization period or adopt accelerated depreciation and amortization methods.
The fixed assets referred to in this article refer to fixed assets other than houses and buildings.
IV. This notice shall be implemented from January 1, 2020 to December 31, 2024.

Ministry of Finance State Administration of Taxation
June 23, 2020