South China's Hainan province issued an announcement on July 31 that details the preferential policies regarding corporate income tax in the Hainan Free Trade Port (FTP).
The announcement specified that encouraged industrial enterprises that are registered in the Hainan FTP and has substantial operations will be taxed at a reduced rate of 15 percent of their corporate income.
For an enterprise with its head office located in the Hainan FTP, only the head office and branches located in the Hainan FTP shall be involved in judgment for qualification, while the branches set up outside the Hainan FTP shall not be included.
For an enterprise whose head office is founded outside the Hainan FTP, only the branches in the Hainan FTP shall be judged, while the head offices and branches outside are excluded.
Encouraged industries and enterprises can enjoy the policy of being taxed at a reduced corporate income tax rate of 15 percent, in accordance with the regulations.
Enterprises should retain the main documents for reference, including business explanation and substantial operation records.
The explanation document should contain the main business belonging to the specific items in the free trade port catalogue of encouraged industries, as well as the statement that the main business income for the catalogue accounts for more than 60 percent of the total corporate income.
Relevant information about the substantial operation of the enterprise should include total assets, income, personnel, wages and their corresponding proportions distributed among institutions established in the Hainan FTP.
The announcement notes that newly-added overseas direct investment by enterprises in the tourism, modern service industry, and high-tech industries are exempted from taxes from Jan 1, 2020 to Dec 31, 2024, including the establishment of new branches, investment, capital, and acquired equity.
The policy for the exemption of corporate income tax on income from new overseas direct investment takes effect according to regulations during their annual tax declaration. The main documents for reference are explanation documents of enterprises belonging to the tourism industry, modern service industry, and high-tech industry in the free trade port catalogue of encouraged industries, as well as a qualification explanation of the newly-added overseas direct investment income.
For newly purchased assets, one-time deduction or accelerated depreciation and amortization shall be conducted. For self-developed intangible assets, the time of purchase shall be identified according to the time when the intended purpose of assets is achieved. One-time deduction or accelerated amortization will be conducted from the year when they are available for use.
Enterprises that purchase intangible assets and take the approach of shortening the amortization period or accelerating amortization shall follow the rules set by the Notice of Relevant Issues about Accounting Treatment for Income Tax Related to Accelerated Depreciation on Enterprise Fixed Assets issued by the State Taxation Administration (Notice No. 81, 2009).
The one-time deduction or accelerated depreciation and amortization policy can be applied based on the rules during prepayment declaration. The main documents for reference include documents of time when assets are being purchased, as well as the relevant asset accounting vouchers.
In addition, secondary branches, as well as non-resident enterprise institutions and establishments set up in the Hainan FTP that are taxed on the actual basis of account assessment can enjoy one-time deduction or accelerated depreciation and amortization.
Those who fail to enjoy the income tax allowances in time according to the preferential policy before the release of the documents can enjoy the allowances in future monthly or quarterly prepayment declarations or in the 2020 year-end final settlement.
The announcement will be implemented from Jan 1, 2020 to Dec 31, 2024.
Overview
Haikou 
Sanya 
