China: Guidance on corporate tax incentives for entities operating in Hainan free trade port
Guidance intended to provide certainty to eligible taxpayers with operations in the free trade port and to lower the tax risks
Guidance intended to provide certainty to eligible taxpayers
The tax authorities of Hainan province and the State Administration on Taxation in March 2021 jointly released guidance (Announcement  No. 1) clarifying the elements of operations in the Hainan free trade port as well as details about applying these elements in different situations.
The guidance is intended to provide certainty to eligible taxpayers with operations in the free trade port and to lower the tax risks.
The plan for the Hainan free trade port was issued in June 2020 as Cai Shui  No. 31 (“Circular 31”). The plan provides that enterprises in certain industries operating in the free trade port are eligible for a reduced rate of corporate income tax of 15%.
Subsequently, the Hainan provincial tax authorities in July 2020 issued Announcement  No. 4 regarding tax incentive available in the free trade port.
The 2021 guidance—Announcement No. 1—was issued to implement the preferential corporate income tax policies set out in Circular 31 and Announcement No. 4.
Announcement No. 1 specifies four elements that constitute substantive operations and details the requirements for applying these policies in different situations with a view to provide clear policy guidelines and regulatory requirements for enterprises in industries that are eligible for the Hainan free trade port’s preferential corporate income tax policies.
For more information contact a KPMG tax professional:
David Ling | +1 609 874 4381 | email@example.com
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