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On June 10th, 2021, the "Hainan Free Trade Port Law" (hereinafter referred to as the "Law") was passed, which coincided with the first anniversary of the publication of the "Overall Plan for Hainan Free Trade Port Construction". The Law introduced several arrangements aimed at the construction and promotion of the Hainan Free Trade Port (FTP).
The Law has clarified that the status of the FTP is applied to the entire Hainan Island. The law will facilitate the realization of international trade, investment in the region, increased cross-border funds flow, as well as improved transportation and immigration policies. This Law gives Hainan the autonomy to implement reforms and policies to achieve its strategic objectives in the region. Such a high degree of autonomy could only be seen in a few frontier areas such as the city of Shenzhen and the Pudong New Area in Shanghai.
This Law further outlines policies to attract domestic and foreign talents to Hainan. Individuals who meet the conditions in the Hainan Free Trade Port will be subject to individual income tax preferential policies. According to the "Overall Plan", if an individual has lived in the Hainan Free Trade Port for 183 days in a tax year, the comprehensive income derived from the Hainan Free Trade Port will be set at 3%, 10% or 15% applied progressively. The three-tier excess progressive tax rate is levied on personal income tax. This is significantly lower compared to the seven brackets throughout the rest of the country, ranging from 3% to a maximum of 45% individual income tax rates on comprehensive income.
Furthermore, among some of the measures to be introduced is the simplified exit and entry customs clearance. Additionally, the exit and entry bureau management will gradually implement a wider range of visa-free entry policies and extend the visa-free stay time in Hainan.
This Law also lists the four leading industries that the Hainan Free Trade Port will focus on developing, namely tourism, modern service industries, high-tech industries, and high-efficiency agriculture. Ecological and environmental protection systems will also be implemented to safeguard the natural environment of the island.
Should you want to know more about these preferential tax policies, our team of experts at PHC Advisory are at your service to explain all the details. Please, feel free to contact us at info@phcadvisory.com to know more about us and how we can assist you.
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