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 [2021] 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 [2020] 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 [2020] 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 | davidxling@kpmg.com

 

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.