Hainan’s Preferential Policies for Foreign Investment

Haikou, capital city of China's southernmost Hainan province, has introduced a set of preferential policies to attract global conglomerates and boost the development of its headquarters economy. The city government will also provide rewards for companies establishing headquarters that will play a key role in helping boost certain local economic sectors, such as tourism, new and high-tech and tropical agriculture.

Preferential Policies for Foreign Investment in Hainan
1. Foreign-invested enterprises engaged in production and operation in Hainan Special Economic Zone must pay the enterprise income tax at the rate of 15 percent.

2. Foreign-invested enterprises engaged in production and operation in Hainan Special Economic Zone will be exempted from local income tax.

3. Foreign investors without an office in China will be exempted from withholding tax for their income from dividends, interest, rents, royalties and other sources in Hainan Special Economic Zone.

4. For export-oriented or technologically advanced foreign-invested enterprises, the internationally accepted accelerated depreciation method must be adopted to facilitate equipment upgrading and technological progress upon the approval of competent authorities in charge of finance and taxation in Hainan.

5. After the verification and approval by the local tax authority, forty percent of enterprise income tax already paid on the reinvested portion shall be refunded to foreign investors, who reinvest the profits from Hainan Special Economic Zone in China for a period of no less than five years. If the profits are reinvested for infrastructure development, agricultural development enterprises, products export enterprises or technologically advanced companies in Hainan Special Economic Zone, the total amount of enterprise income tax already paid on the reinvested portion must be refunded to foreign investors.

6. Products from foreign-invested enterprises sold in Hainan Special Economic Zone will be exempted from product tax or value-added tax, apart from products such as tobacco, alcohol, mineral oil and a few other products that are subject to halved product tax or value-added tax in accordance with regulations of Hainan Provincial People's Government. For products that contain imported materials or parts with tax exemption or reduction treatment, the tax for those materials or parts will be exempted, reduced or paid in accordance to the relevant state regulations.

7. Products from foreign-invested enterprises sold to places other than Hainan in China will be levied with product tax or value-added tax, in addition to getting approval from competent authorities for products restricted for import into China. For products that contain imported materials or parts with tax exemption or reduction treatment, the tariff, product tax or value-added tax for those materials or parts will be levied in accordance with relevant state regulations.

8. Foreign-invested enterprises that need loans in the production and distribution processes will enjoy priority in getting loans from the depositary bank or other financial institutions in accordance with the Regulations of the Bank of China on Loans to Foreign-Invested Enterprises.

9. Foreign-invested enterprises may apply for replacing imports with local production if their products are sold in China and comply with relevant state regulations.

10. Foreign investors will be encouraged by preferential policies to establish export-oriented or technologically advanced enterprises.

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