Announcement on Issues Related to the Substantive Operation of Enterprises in Encouraged Industries in Hainan Free Trade Port

No. 1 of 2021

In order to implement the Overall Plan for the Construction of Hainan Free Trade Port and promote the development of enterprises in encouraged industries in Hainan Free Trade Port, in accordance with 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 (Caishui [2020] No. 31) and the Announcement of the State Administration of Taxation Hainan Provincial Taxation Bureau on Issues Concerning Preferential Policies for Enterprise Income Tax in Hainan Free Trade Port (Announcement of the State Administration of Taxation Hainan Provincial Taxation Bureau No. 4 of 2020), the following issues concerning the substantive operation of enterprises in encouraged industries in Hainan Free Trade Port (hereinafter referred to as the "Free Trade Port") are hereby announced:
1. This announcement applies to resident enterprises registered in the Free Trade Port, branches of resident enterprises established in the Free Trade Port, and institutions and places established in the Free Trade Port by non-resident enterprises.
2. Resident enterprises registered in the Free Trade Port that are engaged in encouraged industrial projects and have not established branches outside the Free Trade Port, their production and operation, personnel, accounts, assets, etc. are in the Free Trade Port, which is considered to be substantive operation in the Free Trade Port.
For resident enterprises that are only registered in the Free Trade Port and whose production, operation, personnel, accounts, assets, etc. are not in the Free Trade Port, they are not considered to be substantially operating in the Free Trade Port and shall not enjoy the preferential corporate income tax policies of the Free Trade Port.
3. If a resident enterprise registered in the Free Trade Port engages in encouraged industrial projects and establishes branches outside the Free Trade Port, the resident enterprise shall implement substantial and comprehensive management and control over the production, operation, personnel, accounts, assets, etc. of each branch, which is considered to be substantially operating in the Free Trade Port.
4. If a resident enterprise registered outside the Free Trade Port establishes a branch in the Free Trade Port, or a non-resident enterprise establishes an institution or place in the Free Trade Port, the branch or institution or place has production and operation functions, and has operating income, employee salaries and total assets that match its production and operation functions, which is considered to be substantially operating in the Free Trade Port.
5. If a resident enterprise registered in the Free Trade Port establishes a branch outside the Free Trade Port, or a resident enterprise registered outside the Free Trade Port establishes a branch in the Free Trade Port, it shall strictly follow the provisions of the Announcement of the State Administration of Taxation on Issuing the Measures for the Collection and Administration of Corporate Income Tax for Cross-regional Operations and Aggregate Taxpayers (Announcement No. 57 of the State Administration of Taxation in 2012) to calculate the taxable income and taxes of the head office and branches, and pay corporate income tax in accordance with the regulations.
6. If non-resident enterprise institutions and places established in the Free Trade Port meet the prescribed conditions for aggregate payment of corporate income tax, they shall strictly follow the provisions of the Announcement of the State Administration of Taxation, the Ministry of Finance and the People's Bank of China on Issues Concerning the Aggregate Payment of Corporate Income Tax by Non-resident Enterprise Institutions and Places (Announcement No. 12 of the State Administration of Taxation in 2019) to calculate the taxable income and taxes, and pay corporate income tax in accordance with the regulations.
7. Enterprises that meet the requirements of substantial operation and enjoy the preferential corporate income tax policies for the encouraged industries of the free trade port shall, after completing the annual settlement, collect and retain relevant materials in accordance with the provisions of the "Announcement of the State Administration of Taxation Hainan Provincial Taxation Bureau on Issues Related to the Preferential Corporate Income Tax Policies of the Hainan Free Trade Port" (Announcement No. 4 of the State Administration of Taxation Hainan Provincial Taxation Bureau in 2020) for tax authorities to verify.
8. Enterprises that enjoy tax preferential policies should implement the audit collection method to collect corporate income tax
9. This announcement will be implemented from January 1, 2020 to December 31, 2024.
This announcement is hereby announced.

State Administration of Taxation Hainan Provincial Taxation Bureau
Hainan Provincial Department of Finance
Hainan Provincial Market Supervision Administration
March 5, 2021