THE ESTABLISHMENT OF HAINAN FREE TRADE PORT
On 1 June 2020, the CPC Central Committee and The State Council issued the Overall Plan for the Construction of Hainan Free Trade Port. On 3 June 2020, 11 key parks in Hainan Free Trade Port were simultaneously launched, and the management system reform of the parks has been implemented successively.
HAINAN FREE TRADE PORT POLICIES
1. Tax Policies
a) The Ministry of Finance and the State Administration of Taxation promulgated the Notice on the Personal Income Tax Policy on High-end and Urgent-needed Talents in Hainan Free Trade Port: High-end talents and urgently needed talents working in Hainan Free Trade Port, will be exempted from the actual tax burden of individual income tax exceeding 15%.
b) The Ministry of Finance and the State Administration of Taxation promulgated Notice on the Preferential Policy of Enterprise Income Tax in Hainan Free Trade Port: Enterprises registered in Hainan Free Trade Port and substantially operating in encouraged industries will be subject to a reduced enterprise income tax rate of 15%.
c) The Ministry of Finance, the Ministry of Transport, and the State Administration of Taxation promulgated the Notice on the VAT Policy for International Transport Vessels in Hainan Free Trade Port: The VAT refund policy shall be implemented for vessels built in China, registered in Yangpu Port, and engaged in international transport as well as Hong Kong, Macao, and Taiwan transport business.
d) The Ministry of Finance, the General Administration of Customs, and the State Administration of Taxation promulgated the Notice on "Zero Tariff" Policy on Transport and Yachts in Hainan Free Trade Port: Eligible enterprises in Hainan Free Trade Port importing transport vehicles and yachts listed in the Zero Tariff Transport Vehicles and Yachts List will be exempted from import value-added tax and consumption tax.
e) The Ministry of Finance, the General Administration of Customs and the State Administration of Taxation promulgated the Notice on the Trial of Tax Refund Policy for Port of Departure in Hainan Free Trade Port: Eligible exporting enterprises with container goods may apply for customs declaration and export at the port of departure. This process can be facilitated by qualified carriers, either through the waterway via a direct route or through the designated stopover port. The departure from China is facilitated from Hainan Yangpu Port, and these enterprises can handle the export VAT tax refund at the port of departure or the designated stopover port.
f) The Ministry of Finance, the General Administration of Customs and General Administration of Taxation promulgated the Notice on the "Zero Tariff" Policy on Self-Use Production Equipment in Hainan Free Trade Port: For eligible production equipment imported by enterprises in Hainan Free Trade Port for their own use, custom duties, import value-added taxes, and consumption taxes shall be exempted, except for goods expressly not tax-exempt or prohibited by PRC laws and regulations, and equipment listed in the Negative list of "Zero tariff" Self-use Production Equipment in Hainan Free Trade Port, which is attached to this Notice.
g) The General Administration of Customs promulgated the Notice by Customs on Issuing Interim Measures for Tax Collection and Administration of Processed Value-added Goods for Domestic Sale in Yangpu Bonded Port Area: Import duties of goods produced by encouraged industrial enterprises in specific areas (currently Yangpu Bonded Port Area, Haikou Comprehensive Free Trade Zone, and Haikou Airport Comprehensive Free Trade Zone) that (i) do not contain imported materials or (ii) contain imported materials but have been processed with a value increase exceeding 30% to be sold domestically outside the areas shall be exempted.
2. Investment Policies
a) Special Administrative Measures for Foreign Investment Access to Hainan Free Trade Port (Negative List) promulgated by the National Development and Reform Commission and the Ministry of Commerce, specifically introduces a number of special measures to further relax market access. For some industries, their conditional access in other areas of the country can become unconditional access in Hainan. In cases where access is prohibited in other areas of the country, they can be granted conditional or even unconditional access in Hainan.
b) The National Development and Reform Commission and the Ministry of Commerce have published the Catalogue of Encouraged Foreign-invested Industries (2022 Edition).
3. Financial Policies
a) Opinions on Financial Support for Comprehensively Deepening Reform and Opening Up in Hainan, issued by the People's Bank of China and other departments, propose 33 specific measures in six aspects. These measures include improving the level of CNY convertibility and supporting the liberalisation and facilitation of cross-border trade and investment. For example, overseas individuals working in Hainan Free Trade Port, engaged in various types of domestic investments, including securities investment, received support. Eligible non-residents are allowed to purchase real estate in Hainan Free Trade Port based on actual needs, and exchange facilities are provided for eligible non-residents to purchase real estate, among other benefits.
b) The Hainan Branch of the State Administration of Foreign Exchange has issued Pilot Management Measures for Overseas Listing Registration of Companies in Hainan Free Trade Port. Eligible companies in Hainan Free Trade Port can apply for overseas listing registration, changes, and de-registration directly to banks under the jurisdiction of the Hainan branch of the State Administration of Foreign Exchange.
c) Provincial and Local Financial Supervision Bureaus, among other departments, have introduced interim measures in Hainan Province for Domestic Equity Investment by Qualified Foreign Limited Partners (QFLP).
d) The Provincial local Financial Supervision Bureau and other departments have implemented Work Measures in Hainan Province for Supporting Yangpu Bonded Port Area in Carrying Out New Type Offshore International Trade.
e) The Hainan Branch of the State Administration of Foreign Exchange has issued the Enforcement Regulation on Pilot Reform of Foreign Exchange Management in the Yangpu Economic Development Zone to Carry out High-level Opening of Cross-border Trade and Investment.
f) Provincial and Local Financial Regulatory authorities, alongside other departments, have introduced Interim Measures in Hainan Province for Pilot Work of Qualified Domestic Limited partner (QDLP) Carrying Out Overseas Investment.
4. Industrial Policies
a) The National Development and Reform Commission, the Ministry of Finance, and the State Administration of Taxation have issued a Notice on Issuing Catalogue of Encouraged Industries in Hainan Free Trade Port (2020 Edition).
b) The Provincial Government has promulgated Several Policies of Hainan Province to Support the Development of High-tech Enterprises (Trial).
c) The General Office of the Provincial Government has issued a Notice on the Issuance of Administrative Measures for Permission of Import & Export & Production & Operation of Seeds in Hainan Free Trade Port.
d) The Provincial Science and Technology Department has introduced Interim Measures for the Identification and Administration of Scientific and Technical Small and Medium-sized Enterprises in Hainan Province.
5. Park Policies
a) The Standing Committee of the Provincial People's Congress has issued a Decision on the Management System of Hainan Free Trade Port Yangpu Economic Development Zone and other Key Parks.
b) The Standing Committee of the Provincial People's Congress has published a Decision on Approving Promotion and the Application of "Three Parks" Special Minimalist Approval in Six Parks, including Yangpu Economic Development Zone.
c) The Provincial Park Development and Construction Joint Conference Office has introduced Opinions on the Implementation of the "Enclave Economy" Policy in the Park (Trial).
FEATURES OF HAINAN FREE TRADE PORT
1. Talent & Enterprise Attraction
The government has been proactively sending letters to qualified talents and enterprises to explain how to enjoy the preferential income tax policies.
2. Efficiency of Government Approval and Services
The efficiency of government approval and services has significantly improved, promoting trade and investment facilitation, data security, and the business environment.
a) The pilot bank account system combining local and foreign currencies was launched.
b) The Ministry of Industry and Information Technology approved the establishment of the Haikou Regional International Communication Service Import and Export Bureau, leading to new progress in the secure and orderly flow of cross-border data.
c) A "Single Window" for administrative approval, international investment, international trade, and human resources services was set up to reduce the time required for approval.
d) All customs approval procedures have been streamlined into a "One Window" online platform.
e) The application materials and approval time for international ship registrations have been reduced by 60% and 86%.
3. Construction of International Tourism Consumption Centers
The construction of international tourism consumption centers were accelerated. Successful events such as the third Hainan International Film Festival and the International Year of Tourism Consumption were held. A-level tourist attractions were evaluated and yacht-related service enterprises were established.
4. Other Achievements and Related Activities
a) A Free Trade Port Law Assistance Research Group was set up.
b) The Standing Committee of the Provincial People's Congress reviewed and passed 10 regulations, including Interim regulations on anti-smuggling, regulations on Tropical Rainforest National Park, and four amendments to the regulations, including those related to the protection of mangrove forests and other local regulations in Hainan Free Trade Port concerning fair competition, bankruptcy, etc.
c) Arbitration rules in line with international standards were explored, leading to the establishment of the Hainan Arbitration Center of China International Economic, Trade Arbitration Commission, the Hainan Arbitration Center of China Maritime Arbitration Commission, and the Intellectual Property Court of Hainan Free Trade Port.
d) Various high-level foreign exchange activities were organised and held to continuously enhance the international influence of Hainan Free Trade Port.
e) An interconnection between Hainan Free Trade Port and the Shanghai Free Trade Zone were established. On 31 March 2023, the Forum on Strategic Interconnection and Cooperation between Hainan Free Trade Port and the China (Shanghai) Pilot Free Trade Zone was held in Haikou to promote the establishment of a regular exchange and cooperation mechanism between the two sides. During the symposium, the Management Committee of China (Shanghai) Pilot Free Trade Zone and the Office of the Free Trade Port Working Committee of the CPC Hainan Provincial Party Committee signed a strategic cooperation agreement. Additionally, the Haikou National High-tech Industrial Development Zone signed a strategic cooperation framework agreement with Shanghai Zhangjiang (Group) Co., Ltd., establishing an "Enclave Economy" Cooperation Demonstration Zone.
CHINA UPDATES
Accounting and Taxation
- Four More Regions join the Pilot Program for Digital E-invoices
The tax bureaus in four regions, including Hebei, Hubei, Heilongjiang and Xinjiang Autonomous Region, released their respective announcements on 22 September 2023, regarding the implementation of the Pilot Program for Fully-digitalised Electronic Invoices ("digital e-invoices"). This program began on 1 October 2023.
According to the announcements, pilot taxpayers for this program are those utilising the e-invoice service platform, with the specific scope determined by the tax bureaus. The acceptance scope of invoices issued by pilot taxpayers through the e-invoice service platform extends nationwide. Simultaneously, pilot taxpayers in these four regions will accept digital e-invoices issued by their counterparts in other pilot regions through the electronic invoice service platform. Notably, the four pilot regions have introduced two new types of invoices - digital e-invoices labeled "Itinerary/Receipt of E-ticket for Air Transport” and “E-ticket for Railway Transport." These new invoices possess the same legal effect and basic usage as the existing ones.
As of now, the pilot program for digital e-invoices has expanded to cover 28 regions across the country.
Promoting the Upgrading and Development of Advanced Manufacturing Industries
To enhance the innovative capacity and core competitiveness of enterprises, the Ministry of Finance and the State Taxation Administration (SAT) issued “Announcement on the Weighted VAT Deduction Policy for Advanced Manufacturing Enterprises” [2023] No. 43. This policy will be effective from 1 January 2023 to 31 December 2027.Under this announcement, advanced manufacturing enterprises are permitted to deduct 5% of the current deductible input tax amount from the VAT payable. These enterprises are required to adhere to the following conditions when conducting their VAT filing returns for the current period:
- Advanced manufacturing enterprises should calculate the weighted deduction amount for the current period based on 5% of the current deductible input tax amount.
- Weighted deduction amounts shall not be accrued for input tax that cannot be deducted from output tax according to prevailing provisions.
- When the input tax for which weighted deduction has been accrued is transferred out as required, the weighted deduction amount shall be adjusted downward correspondingly in the period when the input tax is transferred out.
Human Resources
- The Hongqiao International Central Business and District Administration Committee of the Shanghai Municipal Commission of Commerce issued a notice titled "Several Measures to Accelerate the Upgrading of Service Enterprises in Hongqiao International Central Business District's ‘Going Global’ level” on 20 Oct 2023.
These measures aim to attract high-end talent clusters. With the Hongqiao International Business Talent Port and China Shanghai Human Resources Service Industrial Park Hongqiao Park as the carriers, they accelerate the launch and implementation of special plans to attract talents. These plans include providing services such as talent apartments, public rental housing, children's education, medical care and other services for all types of talents, while also accelerating the improvement of relevant supporting service facilities. Additionally, there are increased efforts to attract foreign talents, along with convenience measures such as long-term work residence and permanent residence. Port visa facilitation is offered for foreign talents who need to enter the country urgently for business activities. Foreign talents requiring multiple temporary entries can apply for multiple visas.
Corporate Governance
- In the past, all overseas mobile payment systems could not be used in Mainland China due to various reasons, including governmental foreign exchange controls. However, this changed on 17 August 2023, when China's local mobile payment system, AliPay, launched its new Global Version (“Alipay Global”). Users outside China can now download and link it to their bank cards under mainstream international card groups like Visa, Mastercard, DinersClub, Discover, JCB, and more.
This development offers two significant benefits:
(i) It provides greater convenience and swiftness for overseas guests when paying for meals, shopping, hotel accommodations, and other needs in Mainland China.
(ii) With the increased adoption of Alipay Global by overseas users, foreign-invested enterprises that purchase raw materials and run e-commerce businesses in Mainland China can sell their products to customers worldwide using a more convenient payment method.