The Ministry of Finance and the State Administration of Taxation jointly issued the Circular on the preferential policies of Enterprise income tax in Hainan Free Trade Port (June 23, 2020)
Department of Finance of Hainan Province, Bureau of Taxation of Hainan Province, State Administration of Taxation:
In order to support the construction of a free trade port in Hainan, the relevant preferential policies for enterprise income tax are hereby notified as follows:
I. for encouraged industrial enterprises registered in Hainan Free Trade Port and operating substantially, the enterprise income tax shall be levied at a reduced rate of 15%.
The term “encouraged industrial enterprises” as mentioned in this Article refers to enterprises whose main business is the industrial projects specified in the catalogue of encouraged industries in Hainan Free Trade Port, and their main business income accounts for more than 60% of the total income of the enterprise. The so-called substantive operation means that the actual management organization of the enterprise is located in Hainan Free Trade Port and implements substantive and comprehensive management and control over the production and operation, personnel, accounts and property of the enterprise. Enterprises that are not in line with substantive operation shall not enjoy preferential treatment.
The catalogue of encouraged industries of Hainan Free Trade Port includes the guidance Catalog of Industrial structure Adjustment (2019), the catalogue of Industries encouraging Foreign Investment (2019 Edition) and the catalogue of new encouraged industries of Hainan Free Trade Port. If the above catalogue is revised within the implementation period of this Circular, the new version shall be implemented as of the date of implementation of the revised version.
For eligible enterprises whose head offices are located in Hainan Free Trade Port, the 15% tax rate shall be applied only to the income of their head offices and branches in Hainan Free Trade Port, and 15% tax rate shall be applied to enterprises whose head offices are located outside Hainan Free Trade Port. 15% tax rate shall be applied only to the income of qualified branches located in Hainan Free Trade Port. The specific measures for collection and administration shall be implemented in accordance with the relevant provisions of the State Administration of Tax.
2. Income derived from new foreign direct investment of tourism, modern service and high-tech industrial enterprises established in Hainan Free Trade Port shall be exempted from enterprise income tax.
The income from additional foreign direct investment mentioned in this Article shall meet the following conditions:
(1) the operating profits obtained from the newly established overseas branches, or the dividend income corresponding to the new overseas direct investment if it is redistributed from overseas subsidiaries with a shareholding ratio of more than 20% (including).
(2) the statutory tax rate of enterprise income tax in the invested country (region) shall not be less than 5%.
The term “tourism”, “modern service industry” and “high-tech industry” mentioned in this Article shall be carried out in accordance with the catalogue of industries encouraged by Hainan Free Trade Port.
3. For enterprises established in Hainan Free Trade Port, if the unit value of newly purchased (including self-built or self-developed) fixed assets or intangible assets does not exceed 5 million yuan (inclusive), it is allowed to be included in the current cost and deducted when calculating taxable income, and depreciation and amortization will no longer be calculated on an annual basis. Newly purchased (including self-built or self-developed) fixed assets or intangible assets with a unit value of more than 5 million yuan may shorten the number of years of depreciation or amortization or adopt the method of accelerating depreciation and amortization.
The term “fixed assets” as mentioned in this Article refers to fixed assets other than houses and buildings.
IV. This Circular shall enter into force from January 1, 2020 to December 31, 2024.
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