Foreign investors should note Hainan Free Trade Port’s incentives to attract firms include a lowered corporate income tax rate for enterprises, tax exemption for overseas income, one-off pre-tax deduction and accelerated depreciation and amortization for newly purchased assets, as well as individual income tax relaxations.
According to the policies, enterprises registered in the Hainan Free Trade Port (FTP) will get a chance to enjoy the following three major corporate income tax (CIT) relaxations:
1.Enterprises in encouraged industries and engaging in substantive operations are entitled to CIT at a reduced tax rate of 15 percent;
2.Income from new overseas direct investment derived by enterprises in the tourism, modern service, and high-tech industry may be exempted from CIT; and
3.Eligible capital expenditures can be allowed one-off pre-tax deductions or accelerated depreciation and amortization.
Application of preferential corporate tax policies
Currently, the statutory CIT rate in China is 25 percent. However, enterprises may enjoy a favorable CIT rate of 15 percent in Hainan, if they meet the following three criteria:
1.The enterprise is registered in the Hainan FTP;
2.The enterprise has substantive operations in the Hainan FTP; and
3.The primary business of the enterprise is in the list of encouraged industries in the Hainan FTP.
By substantive operation, authorities refer to the actual management of the enterprise, such as the board of directors and board of shareholders, who should be based in Hainan FTP and must implement substantive management and control over the enterprise’s manufacturing and business operations, staff, accounts, and properties from Hainan.
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