Provincial Taxation Bureau's "Notice on Providing Substantive Operation and Management Services for Encouraged Industrial Enterprises in Hainan Free Trade Port"

State Administration of Taxation, tax bureaus of cities, counties and Yangpu Economic Development Zone in Hainan Province, all dispatched units, and all units within the bureau:
In order to implement the "Announcement of the State Administration of Taxation, Hainan Provincial Taxation Bureau, Hainan Provincial Department of Finance, and Hainan Provincial Market Supervision Administration on Issues Concerning the Substantive Operation of Enterprises in Encouraged Industries in Hainan Free Trade Port" (No. 1 of 2021) and the "Supplementary Announcement of the State Administration of Taxation, Hainan Provincial Taxation Bureau, Hainan Provincial Department of Finance, and Hainan Provincial Market Supervision Administration on Issues Concerning the Substantive Operation of Enterprises in Encouraged Industries in Hainan Free Trade Port" (No. 5 of 2022, hereinafter referred to as the "Supplementary Announcement"), effectively promote the implementation of preferential policies, and ensure that enterprises enjoy policy benefits in a timely manner, the following notice is hereby issued on the management and service work for the substantive operation of enterprises in encouraged industries in Hainan Free Trade Port (hereinafter referred to as the Free Trade Port):
I. Accurately grasp the policy standards
(I) Standards for production and operation in the Free Trade Port
There are two levels of standards for production and operation in the Free Trade Port. The first is the business level standard, which requires the main production and operation location to be in the Free Trade Port. The second is the management and control level standard. The institution that implements substantial and comprehensive management and control of production and operation is located in the free trade port, that is, production and operation decisions (such as planning, control, assessment, evaluation, etc.), financial decisions (such as borrowing, lending, financing, financial risk management, etc.), and personnel decisions (such as appointment, dismissal, salary, etc.) are made or executed by institutions established in the free trade port. If one of the above two standards is met, it meets the standards for production and operation in the free trade port.
(II) Standards for personnel in the free trade port
In a tax year, an enterprise must have at least 3 (inclusive) to 30 (inclusive) employees who have lived in the free trade port for a total of 183 days. Among them, if the number of employees is less than 10, at least 3 (inclusive) must live in the free trade port for a total of 183 days in a tax year; if the number of employees is more than 10 (inclusive) but less than 100, at least 30% (inclusive) of the employees must live in the free trade port for a total of 183 days in a tax year; if the number of employees is more than 100 (inclusive), at least 30 (inclusive) must live in the free trade port for a total of 183 days in a tax year.
(III) Calculation of the number of employees
The number of employees includes the number of employees who have established labor relations with the enterprise and the number of labor dispatched by the enterprise.
For enterprises with their head offices located in the free trade port, the number of employees refers to the number of employees of their head offices and branches located in the free trade port; for enterprises with their head offices located outside the free trade port, the number of employees refers to the number of employees of their branches located in the free trade port; for institutions and places of non-resident enterprises located in the free trade port, the number of employees refers to the number of employees of institutions and places in the free trade port.
The same employee shall not be counted as the number of employees of multiple enterprises repeatedly. The number of employees is determined by the quarterly average of the enterprise throughout the year, and the specific calculation formula is as follows:
Quarterly average = (beginning of quarter value ' end of quarter value) ÷ 2
Annual quarterly average = sum of quarterly averages of the whole year ÷ 4
For enterprises that start or terminate business activities in the middle of the year, the above-mentioned related indicators shall be determined based on the actual business period as a tax year.
(IV) Calculation of residence days
Residence days refer to the cumulative number of days stayed in the free trade port within a tax year.
If the stay in the free trade port is less than 24 hours on the day, it shall be calculated as one day.
For enterprises that start or terminate business activities in the middle of the year, and the actual business period is less than half a year, the standard of cumulative residence of 183 days shall be calculated by half according to the number of days in the actual business period.
2. Optimize tax services
(I) Do a good job in policy interpretation
The municipal and county bureaus should help taxpayers fully understand the policies through a combination of online and offline multi-channel and multi-form publicity and guidance methods, actively guide taxpayers to enjoy them in compliance, and ensure the implementation of preferential policies. All municipal and county bureaus should strengthen personnel training, especially tax guidance and consulting training in the tax service hall, do a good job in guidance and explanation, and promptly solve the difficult problems reflected by taxpayers. All municipal and county bureaus should ensure that the policy and business consultation telephones open to the public run smoothly, answer efficiently, and are standardized and accurate.
(II) Strengthen on-the-spot guidance
During the annual income tax prepayment period, for enterprises that apply for the first time to enjoy the free trade port corporate income tax preferential treatment, and for enterprises that have personnel income that reaches the standard for enjoying the free trade port personal income tax preferential treatment for the first time, and have not carried out substantial operation guidance, all municipal and county bureaus will mainly provide risk warning reminder guidance, and strengthen policy publicity and guidance on whether the enterprise meets the standards of the "Supplementary Announcement".
(III) Simplify the way to enjoy the preferential treatment
Enterprises that enjoy the preferential corporate income tax policy of the encouraged industries of the free trade port shall adopt the declaration and handling method of "self-determination, declaration and commitment, and retention of relevant materials for future reference". When the enterprise makes the annual income tax settlement declaration, it shall fill in the "Substantial Operation Self-Assessment Commitment Form" (Attachment) and submit it together with the tax return form through the electronic tax bureau.
(IV) Implement post-verification
After the annual income tax settlement period ends, the tax department will coordinate with the finance, market supervision and management departments to organize joint verification. The joint verification mechanism and the competent tax authorities will implement "full coverage" verification of enterprises newly added in the current year that enjoy the preferential corporate income tax policies for industries encouraged by the free trade port, and enterprises or units of high-end and scarce talents that enjoy the preferential personal income tax policies of the free trade port; spot checks will be conducted on existing enterprises or units according to a certain proportion. Before accepting the substantive operation verification of the relevant departments, the enterprise shall first log in to the relevant module of the Hainan Provincial Electronic Taxation Bureau of the State Administration of Taxation, and enter the specific information of the identity cards of the relevant employees according to the minimum standard of the number of permanent employees in the free trade port corresponding to the scale of the enterprise, and the relevant departments shall verify the residence information of the employees entered.
III. Properly handle disputes
The "Supplementary Announcement" has clearly stated that the Provincial Market Supervision Administration will take the lead in establishing a dispute coordination and resolution mechanism, which provides a way to resolve substantive operational disputes of enterprises. All municipal and county bureaus should properly handle disputes, effectively safeguard the legitimate rights and interests and reasonable demands of taxpayers, better ensure the implementation of preferential policies of the free trade port, and continue to create a good business environment.

State Administration of Taxation Hainan Provincial Taxation Bureau
December 7, 2022