In order to support the construction of Hainan Free Trade Port, the Notice on Preferential Policies for Enterprise Income Tax in Hainan Free Trade Port (Caishui [2020] No.31) clarifies the preferential policies for enterprise income tax:

(1) Applicable tax rate 15%: encouraged industrial enterprises registered in Hainan Free Trade Port with substantial operations.

1. For encouraged industrial enterprises registered in Hainan Free Trade Port and having substantial operations, the enterprise income tax shall be levied at the reduced rate of 15%. Encouraged industrial enterprises refer to enterprises whose main business is the industrial projects specified in the Catalogue of Encouraged Industries in Hainan Free Trade Port, and whose main business income accounts for more than 60% of the total income of enterprises. Substantive management refers to the fact that the actual management organization of the enterprise is located in Hainan Free Trade Port, which implements substantive and comprehensive management and control over the production and operation, personnel, accounts and property of the enterprise. Enterprises that do not meet the substantive operation shall not enjoy preferential treatment.

2. The Catalogue of Encouraged Industries in Hainan Free Trade Port includes the Catalogue of Industrial Structure Adjustment Guidance (version 20 19), the Catalogue of Industries Encouraged by Foreign Investment (version 20 19) and the Catalogue of Newly Encouraged Industries in Hainan Free Trade Port. If the above catalogue is revised during the implementation period of this notice, it shall be implemented according to the new version from the date of implementation of the revised version.

3. For qualified enterprises whose head office is located in Hainan Free Trade Port, the tax rate of 15% is only applicable to the income of their head office and branches located in Hainan Free Trade Port; For enterprises whose head office is located outside Hainan Free Trade Port, the tax rate of 15% is only applicable to the income of qualified branches located in Hainan Free Trade Port. The specific collection and management measures shall be implemented in accordance with the relevant provisions of State Taxation Administration of The People's Republic of China.

(2) Income tax exemption: tourism, modern service industry and high-tech industrial enterprises have increased their overseas direct investment.

The income from newly-increased overseas direct investment of tourism, modern service industry and high-tech industrial enterprises established in Hainan Free Trade Port shall be exempted from enterprise income tax. The income from new overseas direct investment shall meet the following conditions:

1. Operating profit of newly established overseas branches; Or the dividend income corresponding to overseas direct investment increased by overseas subsidiaries with a shareholding ratio of more than 20% (inclusive).

2. The statutory enterprise income tax rate of the invested country (region) is not less than 5%.

Tourism, modern service industry and high-tech industry shall be implemented in accordance with the Catalogue of Encouraged Industries in Hainan Free Trade Port.

(3) One-time deduction: the newly purchased fixed assets or intangible assets with a unit value not exceeding 5 million yuan.

For enterprises established in Hainan Free Trade Port, newly purchased (including self-built and self-developed) fixed assets or intangible assets with a unit value of no more than 5 million yuan (inclusive) are allowed to be included in the current cost at one time, and deducted when calculating taxable income, and depreciation and amortization are no longer calculated on an annual basis; Newly purchased (including self-built and self-developed) fixed assets or intangible assets with a unit value of more than 5 million yuan can shorten the depreciation and amortization period or adopt the accelerated depreciation and amortization method. Fixed assets refer to fixed assets other than houses and buildings.