Hainan Free Trade Port’s New Preferential Tax Policies

On June 30th, 2020, the Ministry of Finance together with the State Taxation Administration released the “Circular about Preferential Corporate Income Tax Policy for Hainan Free Trade Port”, and the “Circular about Individual Income Tax Policy for High-end and Urgently Needed Talents at Hainan Free Trade Port” in line with the master plan released on June 1st to build the southern island province of Hainan into a high-level free trade port, showcasing the country's commitment towards both post-pandemic recovery and long-term economic growth. 

These preferential policies are applicable from January 1st, 2020 to December 31st, 2024.

According to the Circulars, 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.

To be eligible for the preferential tax policies, companies must make sure that they run their businesses from the island province so they can enjoy three major corporate income tax (CIT) relaxations such as:

  • Enterprises in encouraged industries and engaging in substantive operations are entitled to CIT at a reduced tax rate of 15%;
  • Income from new overseas direct investment derived by enterprises in the tourism, modern service, and high-tech industry may be exempted from CIT; 
  • Eligible capital expenditures can be allowed one-off pre-tax deductions or accelerated depreciation and amortization.

Moreover, for high-end and urgently needed talents working at the Hainan Free Trade Port, the individual income tax rate is capped at 15%, meaning that the portion of the actual tax burden of individual income tax exceeding 15% shall be exempted.

The preferential tax system of Hainan Free Trade Port is expected to attract many enterprises or the relocation of businesses in encouraged industries.

Click here to visualize the full Notice on Hainan Free Trade Port Corporate Income Tax Preferential Policy:

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