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In 2018, the Chinese government decided to categorize the entire province of Hainan as a free trade zone (FTZ). Recently, on June 1, 2020, Beijing has rolled out a master plan, introducing a series of special policies to develop Hainan into a high-level free trade port (FTP). The objective is to make Hainan FTP on par with other international trade ports such as Hong Kong, Singapore, Rotterdam, and Dubai by 2050.

The Hainan FTP aims to introduce more liberalized special customs supervision, which will allow free cross-border flows of trade, investment, capital, personnel, transport, and data. To upgrade its local economic and industrial structure, Hainan will also release its own Negative List [1] and provide broader market access for foreign investment in industries like high-tech, telecommunication, tourism, and education.

New Policies

1. Individual Income Tax

  • Lower IIT rate to 15% by 2025.
  • From 2025 to 2035, further reduce IIT rates to 3%, 10%, and 15% (three tax brackets) for eligible talents’ taxable income earned in Hainan (qualified talents must stay in Hainan for, no less than 183 days a year.)

2. Corporate Income Tax

  • Enterprises registered in Hainan and encouraged industries in Hainan may enjoy a lower CIT rate of 15% from 2020 to 2025.

  • By 2035, all enterprises will enjoy 15% CIT rate (if they are not in Hainan’s Negative List.)

  • Eligible capital expenditures can be allowed one-off pre-tax deductions or accelerated depreciation and amortization.

  • Income from new overseas direct investment derived by enterprises in the tourism, modern service, and high-tech industry can be exempt from CIT.

[1] Negative List

Special Administrative Measures on Access to Foreign Investment 外商投资准入特别管理措施

Free Trade Zone Special Administrative Measures on Access to Foreign Investment 自由贸易试验区外商投资准入特别管理措施

written by Good Earth


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