In recent years, Hainan has followed the general principles of the "Overall Plan for the Construction of Hainan Free Trade Port" and issued more than 40 relevant regulations and important policies on the business environment, with the aim of establishing a free trade port with the coordinated development of business environment, government services, data sharing, and social credit. It has also released multiple preferential policies, including tariffs and personal income tax, as well as corporate income tax, to attract high-quality domestic and foreign enterprises and achieve rapid and high-quality development.

"Zero Tariffs" Policy

The "List of One Negative and Three Positive" and the "Zero Tariffs" policy list are important tax policy lists that Hainan Free Trade Port achieved in the early stage. As of September 2022, Hainan Free Trade Port has implemented three "Zero Tariffs" lists, with a cumulative import value of nearly 13 billion yuan, and the policy dividends continue to be released.

According to the "Overall Plan for the Construction of Hainan Free Trade Port," different stages of the construction of Hainan Free Trade Port will implement zero tariffs, low tax rates, and simplified tax systems in a step-by-step manner. "Zero Tariffs" is a very important institutional design of Hainan Free Trade Port. According to the "Overall Plan," before the whole island is closed, Hainan Free Trade Port exempts import tariffs, import value-added tax, and consumption tax on imported goods for self-use production equipment of enterprises, operational transportation vehicles and yachts, raw materials and imported goods for consumption by island residents.

On November 11, 2020, the positive list of "Zero Tariffs" for imported raw materials was released and implemented from December 1, 2020. This was the first "Zero Tariffs" commodity list of Hainan Free Trade Port. The positive list of "Zero Tariffs" for imported transportation vehicles and yachts and the negative list of "Zero Tariffs" for self-use production equipment were successively released in December 2020 and March 2021. The three "Zero Tariffs" commodity lists of Hainan Free Trade Port have been implemented successively.

As of September 2022, the cumulative import value of the three "Zero Tariffs" lists was 12.99 billion yuan. Among them, the import value of self-use production equipment with "Zero Tariffs" was 2.11 billion yuan, the import value of raw materials with "Zero Tariffs" was 6.26 billion yuan, and the import value of transportation vehicles and yachts with "Zero Tariffs" was 4.62 billion yuan.

In August 2021, Yazhouwan Science and Technology City Investment Holding Co., Ltd. landed the first "zero tariff" instrument and equipment for enterprises in the park. Based on this, the "zero tariff" policy was extended to institutions in February 2022. On March 9, 2023, the Management Bureau of Sanya Yazhouwan Science and Technology City, through the "Tax-Free Benefit Policy Consultation Window," assisted the Shanghai Jiao Tong University Sanya Yazhouwan Deep Sea Technology Research Institute, a public institution in the park, in applying for the qualification for importing "zero tariff" self-use production equipment through the "Single Window" for China (Hainan) International Trade. On March 11, the research institute became the first public institution in Hainan to obtain the qualification for importing "zero tariff" self-use production equipment. Up to now, a total of 8 institutions, including Sanya Research Institute of Hainan University, and 16 enterprise entities, including Hainan Huada Life Science and Technology Co., Ltd. and Longping Biological Technology (Hainan) Co., Ltd., in the Science and Technology City have obtained the qualification for "zero tariff" self-use production equipment. Hundreds of batches of "zero tariff" equipment have been successfully imported, with a cumulative total value of nearly 600 million yuan and a total amount of tax exemption exceeding 50 million yuan.

In September 2022, Huayi Taikang Pharmaceutical Co., Ltd. and Hainan Shuangcheng Pharmaceutical Co., Ltd. successfully completed customs clearance and release under the guidance of Haikou Customs and Haikou Meilan Airport Customs, marking the rapid clearance of imported pharmaceutical raw materials such as talcum powder and chromatographic column packing. The total value of the goods was 417,400 yuan, and the tax exemption amounted to 82,500 yuan. This is the first batch of pharmaceutical raw materials imported under the "zero tariff" policy of Hainan Free Trade Port, indicating the expansion of the "zero tariff" policy coverage to the pharmaceutical industry.

In May 2021, the first "zero tariff" imported car was cleared by Haikou Port Customs, achieving a breakthrough in zero tariffs. Subsequently, a variety of "zero tariff" new car models, including Toyota Sienna, Lexus LM300h, and Mercedes-Benz GLE, were successively cleared by Haikou Port Customs. As of now, Haikou Customs has supervised a total of 136 "zero tariff" imported vehicles, with a total value of 59.36 million yuan and a tax exemption amount of 39.73 million yuan.

On January 18, 2023, three imported Rolls-Royce Cullinan luxury cars were cleared by Haikou Port Customs, involving a total value of 8.455 million yuan and a tax exemption amount of 9.857 million yuan. This is the largest single-ticket import in terms of value and the highest amount of tax exemption since the implementation of the list of "zero tariff" transportation vehicles and yachts in Hainan Free Trade Port. It is also the first import of a top-level car brand since the establishment of the complete vehicle port in Haikou Port. Taking imported yachts as an example, purchasing them in other domestic regions would incur approximately 38% of import duties and taxes. By purchasing an imported yacht worth 10 million yuan in Hainan, one can save nearly 3.8 million yuan in taxes and fees.

Corporate Income Tax Preferential Policies

According to the "Notice on Corporate Income Tax Preferential Policies for Hainan Free Trade Port" (Finance and Taxation [2020] No. 31), in order to support the construction of the Hainan Free Trade Port, the Hainan Provincial Department of Finance and the Hainan Provincial Taxation Bureau of the State Taxation Administration issued a notice regarding corporate income tax preferential policies. Encouraging industries enterprises registered in the Hainan Free Trade Port and engaged in substantial operations are subject to a reduced corporate income tax rate of 15%.

The term "encouraging industries enterprises" referred to in this article refers to enterprises whose main business is the industry projects specified in the Catalog of Encouraging Industries in Hainan Free Trade Port, and their main business income accounts for more than 60% of the total enterprise income. "Substantial operations" refer to the actual management institution of the enterprise being located in the Hainan Free Trade Port and exercising substantial comprehensive management and control over the production, operation, personnel, accounting, and property of the enterprise. Enterprises that do not meet the requirements of substantial operations are not eligible for the preferential treatment.

The Catalog of Encouraging Industries in Hainan Free Trade Port includes the "Guidance Catalog for Industrial Structure Adjustment (2019 Edition)," the "Catalog of Industries Encouraging Foreign Investment (2019 Edition)," and the newly added Catalog of Encouraging Industries in Hainan Free Trade Port. If any revisions are made to the above catalogs during the implementation period of this notice, the new version shall be implemented from the date of the revised edition.

For eligible enterprises with their headquarters located in the Hainan Free Trade Port, a 15% tax rate is applied only to the income of their headquarters and branch institutions within the Hainan Free Trade Port. For enterprises with their headquarters located outside the Hainan Free Trade Port, a 15% tax rate is applied only to the income of their eligible branch institutions within the Hainan Free Trade Port. Specific tax administration measures shall be implemented in accordance with the relevant provisions of the State Taxation Administration.

Income derived from overseas direct investment newly obtained by tourism, modern service industry, and high-tech industry enterprises established in the Hainan Free Trade Port is exempt from corporate income tax.

For enterprises established in the Hainan Free Trade Port, the acquisition (including self-construction and self-development) of fixed assets or intangible assets with a unit value not exceeding 5 million yuan (inclusive) can be fully deducted as current cost expenses in the calculation of taxable income, without calculating depreciation and amortization on an annual basis. For the acquisition (including self-construction and self-development) of fixed assets or intangible assets with a unit value exceeding 5 million yuan, the depreciation and amortization period can be shortened, or accelerated depreciation and amortization methods can be adopted.

This policy is effective from January 1, 2020, until December 31, 2024.

Talent Introduction Policy

According to the "Notice on Personal Income Tax Policies for High-End and Scarce Talents in Hainan Free Trade Port" (Finance and Taxation [2020] No. 32), effective from January 1, 2020, until December 31, 2024, in order to support the construction of the Hainan Free Trade Port, the Hainan Provincial Department of Finance and the Hainan Provincial Taxation Bureau of the State Taxation Administration issued a notice regarding preferential personal income tax policies. High-end talents and scarce talents working in the Hainan Free Trade Port are exempt from personal income tax on the portion of their actual tax burden that exceeds 15%.

Based on this policy, on September 15, 2022, Hainan released the "Interim Measures for the Management of the List of High-End and Scarce Talents Enjoying Personal Income Tax Preferential Policies in Hainan Free Trade Port" (hereinafter referred to as the "New Measures"), which revised the "Interim Measures for the Management of the List of High-End and Scarce Talents Enjoying Personal Income Tax Preferential Policies in Hainan Free Trade Port" issued by Hainan on August 26, 2020 (hereinafter referred to as the "Original Measures").

The Overall Plan for the Construction of Hainan Free Trade Port clearly states that before 2025, high-end talents and scarce talents working in the Hainan Free Trade Port are exempt from the portion of their personal income tax that exceeds 15%. Before 2035, individuals who have resided in the Hainan Free Trade Port for a cumulative period of 183 days in a tax year will enjoy personal income tax benefits.

For talents who meet the ABCDEF category standards in Sanya Yazhou Bay Science and Technology City and are employed in key talent introduction industries such as deep-sea technology, southern breeding technology, biotechnology, and life health, they can enjoy the "Sanya Yazhou Bay Science and Technology City Talent Introduction Incentive Measures (2022 revised edition)". They are eligible for cash rewards ranging from 200,000 to 4 million yuan, distributed equally over five years. The rewards are as follows: A category: 4 million yuan, B category: 3.2 million yuan, C category: 2.4 million yuan, D category: 1.6 million yuan, E category: 400,000 yuan, F category: 200,000 yuan. For E and F category talents, an additional one-time housing subsidy of 400,000 yuan and 200,000 yuan, respectively, is provided when purchasing residential properties within the science and technology city. Applications for these benefits are accepted on a regular basis.