Core content

A reduced 15% CIT rate is available to enterprises registered in the Hainan FTP and conducting substantive business operations in encouraged industries. The above enterprises include: (a) enterprises registered in the Hainan FTP, (b) branches (not independent legal person) set up in the Hainan FTP, (c) non-resident enterprises and their branches set up in the Hainan FTP.Specifically, the qualified enterprises must meet the following conditions: (a) The management institution is located in the Hainan FTP and the operation documentation must reflect a substantive and comprehensive local management and control over the enterprise’s business operation, personnel, accounts, properties and other relevant aspects; and(b) The primary business activity of the enterprise must fall in The Catalogue of Encouraged Industries for Foreign Investments in the Hainan Free Trade Port; and(c) The revenue from the encouraged business must account for 60% or more of gross revenue.

Supporting documents

●Announcement of Hainan Provincial Tax Service of the State Taxation Administration (STA) on Issues Related to Preferential Corporate Income Tax Policies in Hainan FTP（2020-07-31） 

●Hainan Provincial Tax Service of State Taxation Administration The Department of Finance of Hainan Province Hainan Provincial Administration for Market Regulation Announcement on Issues Related to the Substantive Operation of Enterprises in Hainan FTP Encouraged Industries（2021-03-05） 

●Supplementary Announcement on Issues Related to Substantive Operations of Enterprises in Encouraged Industries in Hainan FTP（2022-09-27） 

●Notice of Hainan Provincial Tax Service of State Taxation Administration on Providing Management Services for Enterprises in Encouraged Industries with Substantive Operation in the Hainan Free Trade Port（2022-12-07） 

Eligible Criteria

1. It specifies the entities eligible for the preferential tax rate. Eligible entities refer to those registered and engaged in substantive operating activities in Hainan Free Trade Port (hereinafter referred to as Hainan FTP), including non-resident enterprise institutions and premises set up in Hainan FTP.2. It specifies the principles for assessing the eligibility of head offices or branches of enterprises for the preferential tax rate. For an enterprise with its head office located in Hainan FTP, its eligibility for the preferential tax rate shall be determined based on whether the main business of its head office and branches set up in the FTP (excluding third- or lower-level branches set up in Hainan FTP by second- or lower-level branches outside Hainan FTP) is included in Hainan FTP catalogue of encouraged industries and on the proportion of its main business income in total corporate income. Branches located outside of Hainan FTP shall not be included in the assessment. For an enterprise with its head office located outside of Hainan FTP, its eligibility for the preferential tax rate shall be determined based on whether the main business of its branches set up in the FTP (excluding third- or lower-level branches set up in Hainan FTP by second- or lower-level branches outside Hainan FTP) is included in Hainan FTP catalogue of encouraged industries and on the proportion of its main business income in total corporate income.

Guidelines

（一）How to apply for the policy benefits

1.Applicants are required to submit their application based on self-assessment and retain the necessary supporting documents. In accordance with the provisions of the Announcement of the State Taxation Administration regarding the Amended Measures for the Administration of Preferential Policies on Corporate Income Tax (STA Announcement No. 23, 2018), enterprises engaged in encouraged industries in the FTP are eligible for preferential policies on CIT. To avail themselves of these tax benefits, taxpayers are expected to apply based on self-assessment while retaining relevant supporting materials.

2.Substantive operation self-assessment commitment. Starting from 2023, tax authorities will provide the Substantive Operation Self-Assessment Commitment Form to enterprises through e-tax service at the time for annual settlement and payment of corporate income tax. Enterprises applying for CIT preferential policies for encouraged industries in the FTP when making CIT settlement shall accurately complete the form, make a commitment to its substantive operation, and submit it along with their tax return form.

（二）How to file a tax return

During the quarterly prepayment and the annual settlement of the CIT, an eligible taxpayer may file its tax return and apply for the preferential tax rate via the e-tax services by following the procedures of [Tax Service] - [Tax Return and Payment] - [Regular Tax Return].

1.Resident enterprises

(1)Enterprises subject to non-consolidated taxation (independent legal entities without branches)

1)Quarterly prepayment. In the Tax Return Form of the People's Republic of China for Monthly (Quarterly) Prepayment of Corporate Income Tax (Type A) (A200000), select the preferential policy option "15% CIT for enterprises in encouraged industries in the Hainan Free Trade Port" from the drop-down box located in Row 13.1 under the heading of "Income Tax Deduction Amount" and fill in the cumulative benefit amount as of the end of a quarter.

2)Annual settlement. In the "Detailed Statement of Income Tax Exemption and Deduction" (A107040) of the Annual Corporate Income Tax Return of the People's Republic of China (Type A, 2017 Version), select the preferential policy option "15% CIT for enterprises in encouraged industries in the Hainan Free Trade Port " in Row 28.3 and fill in the eligible amount for tax deduction for the year.

(2) Enterprises subject to consolidated taxation

The allocation of CIT liability between headquarters and branches shall be calculated in accordance with Article 18 in the Announcement of the State Taxation Administration on Issuing the Measures for the Consolidated Collection of Corporate Income Tax on Trans-regional Operations (STA Announcement No. 57, 2012).

If the headquarters of an enterprise is eligible for preferential treatment, during the quarterly prepayment and the annual final settlement, the headquarters shall follow the abovementioned procedures and fill in the corresponding row. If the branches of an enterprise are eligible for preferential treatment, during the quarterly prepayment and the annual final settlement, the headquarters shall consolidate, calculate, and report the eligible amount for tax deduction, and the branches merely need to fill in the proportion and tax amount to be apportioned in Row 21 and Row 22 of the Tax Return Form of the People's Republic of China for the Monthly (Quarterly) Prepayment of Corporate Income Tax (Type A) (A200000).

2. Institutions and premises of non-resident enterprises

(1)Institutions and premises subject to separate taxation

1)Quarterly prepayment. In "Item ① - Item ③" from Row 15 to Row 17 under Row 14 "Income Tax Deduction Amount" in the Tax Return Form of the People’s Republic of China for the Prepayment of Non-resident Corporate Income Tax (2019 Version) (F100), fill in the deduction property code "04039902" (corresponding to the deduction item of CIT to be collected at 15% for enterprises in encouraged industries registered in the FTP) in the underlined part, and fill in the cumulative amount of the income tax deduction enjoyed as stipulated at the end of the declaration period in the corresponding row of "actually calculated cumulative amount of income tax deduction of the year".

2)Annual final settlement. In "Item ① - Item ②" from Row 23 to Row 24 under Row 22 "Income Tax Deduction Amount" in the Non-Resident CIT Annual Return of the People's Republic of China (2019 Version) (F200), fill in the deduction property code "04039902" (corresponding to the deduction item of CIT to be collected at 15% for enterprises in encouraged industries registered in the FTP) in the underlined part, and fill in the cumulative amount of the income tax deduction amount enjoyed as stipulated at the end of the declaration period in the corresponding row of "actually calculated declared amount of income tax deduction".

(2)Institutions and premises subject to consolidated taxation

If a non-resident enterprise has established two or more institutions and premises in China, it may choose to pay the CIT by its primary institution and premise upon approval by the tax authority. If the primary institution and premise subject to consolidated taxation are eligible for preferential tax benefits, during the quarterly prepayment, they shall fill in Row 22 to Row 25 in the Tax Return Form of the People’s Republic of China for the Prepayment of Non-resident Corporate Income Tax (2019 Version) (F100) based on the completion of Row 1 to Row 21; during the annual final settlement, fill in Row 1 to Row 32 in the Non-Resident CIT Annual Return of the People's Republic of China (F200). Other institutions and premises subject to consolidated taxation shall, according to the proportion and tax amount to be apportioned, fill in Row 26 to Row 27 in the Tax Return Form of the People’s Republic of China for the Prepayment of Non-resident Corporate Income Tax (2019 Version) (F100) during quarterly prepayment; during the annual final settlement, they can directly fill in Row 32 instead of Row 1 to Row 31 in the Non-Resident CIT Annual Return of the People's Republic of China (2019 Version) (F200).