The statutory CIT rate on income from overseas direct investment of enterprises in China is currently 25 percent. But in Hainan, the CIT is exempt on such overseas income, if the following criteria are met:
1.The income is derived by companies in the tourism, modern service, and high-tech sectors included in the encouraged industries in Hainan FTP; and
2.The income is from newly increased overseas direct investment.
At the same time, such overseas income must satisfy the following conditions:
1.The overseas income is the operational revenue of newly established overseas branches, or dividend income corresponding to the new direct investment obtained from the overseas subsidiaries with a 20 percent plus (inclusive) equity held by the parent company; and
2.The statutory CIT rate of the invested country or region is not less than 5 percent.
That is to say, income from equity transfer cannot enjoy the tax exemption nor can overseas income from tax havens like the Cayman Islands.
One-off pre-tax deduction or accelerated depreciation and amortization for newly purchased assets
For an enterprise established in Hainan FTP, its newly purchased fixed assets or intangible assets with a unit value of no more than RMB 5 million (US$70.9 million) are allowed to be included in the current costs and expenses and to be fully deducted on a one-time basis before calculating the taxable income, and there is no need to annually calculate depreciation and amortization.
If the unit value of the new assets exceeds RMB 5 million (US$70.9 million), the depreciation or amortization period can be shortened, or the accelerated depreciation or amortization method can be adopted. The newly purchased fixed assets and intangible assets include those assets that are self-constructed and self-developed but exclude houses and buildings.
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