Currently, individual income tax in China is levied at a progressive rate, ranging from three percent to 45 percent with seven tax brackets. Operation income tax is also levied at a progressive rate, ranging from 5 percent to 35 percent with five tax brackets.
However, according to the policies, for high-end talents and talents in short supply working at Hainan FTP, the portion of their actual IIT burden exceeding 15 percent will be exempted.
The following types of income sourced from Hainan FTP will be eligible:
1.Comprehensive income, such as wages and salaries, remuneration for labor services, author’s remuneration, and income from royalties;
2.Operation income; and
3.Talent subsidy income recognized by Hainan Province.
This implies that income from investment, such as dividends and bonuses, and income from property transfer, such as equity and real estate transfer, are not to be included. Taxpayers completing the formalities for annual final settlement of IIT in Hainan Province may enjoy the aforesaid preferential policies.
That is to say, eligible Hainan talents still need to pay IIT according to China’s general IIT rate in the current year first. When the final settlement is made during March 1 to May 31 of the next year, the Hainan tax bureau will refund the portion of the IIT that exceeds 15 percent of the actual taxable income.
A list of professions that qualify as high-end talent and talent in short supply who can enjoy the aforesaid preferential policies and specific administrative measures will be formulated by Hainan Province in consultation with the MOF and the STA.
The preferential tax system of Hainan FTP is expected to attract many enterprises or the relocation of businesses in encouraged industries. You are welcome to contact our professionals for clarifications on how Hainan’s preferential policies may apply to your business and derive practical solutions.
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