Announcement of the State Administration of Taxation and the Hainan Provincial Taxation Bureau on issues related to the preferential corporate income tax policies for the Hainan Free Trade Port

(Announcement No. 4 of 2020 of the Hainan Provincial Taxation Bureau of the State Administration of Taxation)

In accordance with the Enterprise Income Tax Law of the People's Republic of China and its Implementing Regulations (hereinafter referred to as the Implementing Regulations), and the Notice of the Ministry of Finance and the State Administration of Taxation on the Preferential Policies for Enterprise Income Tax in Hainan Free Trade Port (Finance and Taxation [2020] No. 31, hereinafter referred to as the Notice), the following issues regarding the implementation of the preferential policies for enterprise income tax in Hainan Free Trade Port are hereby announced:
1. Issues on the reduction of enterprise income tax at a rate of 15% for enterprises in encouraged industries
(1) Enterprises in encouraged industries registered in Hainan Free Trade Port (hereinafter referred to as the Free Trade Port) and in substantial operation shall be subject to a reduced rate of 15% for enterprise income tax. The enterprises referred to in this paragraph include non-resident enterprise institutions and places established in the Free Trade Port.
(II) For enterprises with their head offices located in the Free Trade Port, only the head offices and branches of the enterprise located in the Free Trade Port (excluding branches below the second level established outside the Free Trade Port and branches below the third level established in the Free Trade Port) are included in the scope of judging whether they meet the prescribed conditions, and branches located outside the Free Trade Port are not included in the judgment scope; for enterprises with their head offices located outside the Free Trade Port, only the branches located in the Free Trade Port (excluding branches below the second level established outside the Free Trade Port and branches below the third level established in the Free Trade Port) are judged whether they meet the prescribed conditions, and head offices and branches located outside the Free Trade Port are not included in the judgment scope.
(III) The policy of reducing the corporate income tax rate to 15% for enterprises in encouraged industries can be enjoyed according to regulations when making advance payment declarations. The main materials to be retained for reference are:
1. The specific projects in the catalog of encouraged industries of the free trade port that belong to the main business, and the main business income in the catalog accounts for more than 60% of the total income of the enterprise;
2. The relevant situation of the enterprise's substantive operation, including the total assets, total income, total number of employees, total wages, etc., and the corresponding proportion of the institutions established in the free trade port.
II. The issue of exemption of corporate income tax on income from new overseas direct investment of enterprises in the tourism, modern service and high-tech industries

(I) The new overseas direct investment referred to in Article 2 of the Notice refers to the new overseas direct investment of enterprises between January 1, 2020 and December 31, 2024, including the establishment of new branches and new enterprises in overseas investment, the increase of capital and expansion of shares in established overseas enterprises, and the acquisition of equity in overseas enterprises. (II) The policy of exempting income from new overseas direct investment of enterprises in tourism, modern service industry and high-tech industry from corporate income tax can be enjoyed in accordance with regulations when filing annual tax returns. The main materials to be retained for reference are: the enterprise belongs to the tourism, modern service industry and high-tech industry in the list of encouraged industries of the free trade port, and the statement that the income from new overseas direct investment meets the conditions.
III. One-time deduction or accelerated depreciation and amortization of newly purchased assets
(I) For self-developed intangible assets, the time of purchase shall be confirmed according to the time when the intended use is reached.
(II) Intangible assets shall be deducted in one lump sum or accelerated amortization shall be started in the year when they are available for use.
(III) If the intangible assets purchased by enterprises shorten the amortization period or adopt the accelerated amortization method according to Article 3 of the Notice, they can be implemented in accordance with the relevant provisions of the Notice of the State Administration of Taxation on Issues Concerning the Treatment of Accelerated Depreciation of Fixed Assets of Enterprises (Guoshuifa [2009] No. 81).
(IV) The one-time deduction or accelerated depreciation and amortization policy for newly purchased assets can be enjoyed in accordance with regulations when making advance payment declarations. The main materials to be retained for reference are:
1. Information on the time of asset purchase (such as invoices for assets purchased in the form of currency, arrival time of assets purchased in installments or on credit, completion settlement of self-built fixed assets, and statement on the status of self-developed intangible assets reaching their intended use);
2. Accounting vouchers for relevant assets;
3. Accounts for differences between tax treatment and accounting treatment of relevant assets.
(V) Second-level branches and non-resident enterprise institutions and places established in the Free Trade Port for audit and collection can enjoy the one-time deduction or accelerated depreciation and amortization policy.
IV. This announcement shall be implemented from January 1, 2020 to December 31, 2024. If the preferential treatment is not enjoyed in time before the relevant documents are issued, it can be enjoyed together with the subsequent monthly (quarterly) advance payment declaration or the 2020 annual settlement and settlement according to regulations.
This is hereby announced.

State Administration of Taxation Hainan Provincial Taxation Bureau
July 31, 2020