China has unveiled a master plan to establish a free trade port on Hainan Island. The plan urges the area to lower the entrance threshold for businesses, build a transparent investment environment and strengthen the protection of intellectual property.
The plan calls for industries and products processed in Hainan to be exempt from a value added tax of over 30 percent. Island residents will be able to enjoy duty-free purchases and tourists will be allowed to purchase duty free products valued at 100,000 yuan in Hainan per year. Meanwhile, businesses registered in Hainan province and talent working in the area would be required to pay corporate and individual income taxes of no more than 15 percent.
According to a circular jointly issued by the Ministry of Finance and the State Taxation Administration, corporate income tax rates will be lowered to 15 percent for Hainan-registered eligible companies in certain industries.
Companies in tourism, modern services and high-tech sectors in the island province will be exempt from paying income tax for their proceeds from new outbound direct investments, said the circular.
Individuals with high-level and in-demand expertise working in Hainan will pay income tax no higher than 15 percent of their gross income, business earnings and government-approved allowances from the free trade port, according to a separate circular issued by the two central departments.
Hainan appears to be benefiting from the recent global lockdowns caused by the coronavirus pandemic as, according to a survey released earlier this month by the Joint Tourism Big Data Lab of China Tourism Academy and travel agency Ctrip, over 57% of respondents said they would contemplate taking more domestic trips if outbound travel did not recover during the rest of 2020. Competitive prices also appear to be helping Hainan, particularly when compared to Hong Kong, once one of the top destinations for Chinese tourists to shop.
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