The "Overall Plan for the Construction of Hainan Free Trade Port" clearly states that "income derived from new overseas direct investment made by tourism, modern service industry, and high-tech industry enterprises in the construction of Hainan Free Trade Port before 2025 shall be exempt from corporate income tax." The issuance of the "Income Tax Catalog for Tourism, Modern Service Industry, and High-tech Industry Enterprises in Hainan Free Trade Port" serves as the specific basis for implementing this policy, further implementing the "Overall Plan for the Construction of Hainan Free Trade Port."

Policy Content

According to the Overall Plan for the Construction of Hainan Free Trade Port， for tourism， modern services and high⁃tech industries, enterprises established in Hainan FTP are entitled to corporate tax exemption for income from newly increased overseas direct investment before 2025.

Applicable Conditions

According to the Overall Plan for the Construction of Hainan Free Trade Port,  enterprises registered in Hainan FTP that have a practical operational record and whose main business is specified in the Catalog of Corporate Income Tax Preferences for Tourism, Modern Services and High⁃tech Industries in the Hainan Free Trade Port are entitled to corporate tax exemption for income from newly increased overseas direct investment before 2025.

1. Timing of new foreign direct investment: new foreign direct investment refers to new foreign direct investment made by an enterprise during the period from January 1, 2020 to December 31, 2024.
2. Inclusion in the preferential catalog: Catalog of Corporate Income Tax Preferences for Tourism, Modern Services and High-tech Industries in Hainan Free Trade Port.

The "Announcement of the Hainan Provincial Taxation Bureau of the State Taxation Administration on Relevant Issues Regarding the Preferential Tax Policies for Corporate Income Tax in the Hainan Free Trade Port" lists four forms that meet the above policies:

1. Establishing a new branch overseas through investment.
2. Establishing a new enterprise overseas through investment.
3. Increasing capital and expanding shares of existing overseas enterprises.
4. Acquiring equity of overseas enterprises.

The income from overseas direct investment should meet the following conditions:

1. Scope of overseas income: Operating profits obtained from newly established overseas branches; or dividends corresponding to the new overseas direct investment received from overseas subsidiaries with a shareholding ratio exceeding 20% (inclusive).
2. Tax exemption condition: The statutory corporate income tax rate of the invested country (region) is not lower than 5%.

Calculation Rules

1. Dividends corresponding to the new overseas direct investment: For example, Company A in Hainan, established in 2018, belongs to the encouraged industries in the Hainan Free Trade Port's industry catalog, specifically the modern service industry. In the same year, it held a 10% equity stake in a foreign company. After additional investment in January 2020, the shareholding ratio reached 30%. In 2021, the overseas company distributed 30 million profits based on the 30% shareholding ratio. Only the portion calculated as 30 million ÷ 30% × (30% - 10%) = 20 million can enjoy the preferential policy of exempting corporate income tax on new overseas investment income.
2. The statutory corporate income tax rate of the invested country (region) is not lower than 5%: For example, Company A is a high-tech enterprise established in the Hainan Free Trade Port. In May 2021, Company A invested in a wholly-owned subsidiary, Company B, in Hong Kong. However, due to the statutory capital gains tax rate in Hong Kong being 16.5% (higher than 5%), the additional investment dividend income obtained by Company A from Company B in Hong Kong can enjoy the preferential policy of exempting corporate income tax on overseas investment income.