According to the Circular about Preferential Corporate Income Tax Policy for Hainan Free Trade Port (Cai Shui [2020] No.31) issued by the Ministry of Finance and the State Taxation Administration of the PRC, during the period from 1 January 2020 to 31 December 2024, an enterprise may enjoy a reduced Corporate Income Tax rate of 15%, if it meets the following three criteria:
Registered in Hainan Free Trade Port;
Has substantial operations in Hainan Free Trade Port; and
The main business of the enterprise is specified in the encouraged industrial catalogue of Hainan Free Trade Port, and the revenue from the main business of the enterprise must account for 60% or more of its total revenue.
The key criteria for substantial operations include:
The enterprise’s main production and business operation premises or effective management authority that implement substantive management and control over the enterprise’s production and business operations is based in Hainan Free Trade Port.
At least 3 to 30 employees shall reside in Hainan Free Trade Port for a total of 183 days or more in a tax year according to the size of the enterprise.
The accounting vouchers, accounting books, financial statements and other accounting documents of the enterprise are kept in Hainan Free Trade Port, and the basic deposit bank account and settlement account for main business of the enterprise are opened in Hainan Free Trade Port.
The necessary assets owned by the enterprise for production and operation activities are located in Hainan Free Trade Port.
An enterprise should perform self-assessment to determine whether it is qualified for the preferential corporate income tax rate. In order to enjoy the preferential corporate income tax rate, the enterprise shall fill out and submit a substantial operation self-assessment commitment form to the competent tax bureau. And the relevant supporting documents should be kept for further reference.
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