GUANGZHOU – On March 27, the Ministry of Finance and State Administration of Taxation jointly released a “Circular on Preferential Corporate Income Tax (CIT) Policies and Preferential Catalog for Hengqin New Area, Pingtan Comprehensive Pilot Zone (PCPZ) in Fujian Province and Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone (Caishui  No.26 hereinafter referred to as the ‘Circular’)”. The Circular is effective from January 1, 2014 to December 31, 2020.
Based on the Circular, eligible enterprises in Hengqin, Pingtan and Qianhai will be taxed at a reduced 15 percent CIT rate.
Both of the following conditions must be satisfied for enterprises to enjoy the preferential tax rate:
- Engaged in the business activities categorized as eligible in the Preferential Catalog; and
- The income of these business activities should account for more than 70 percent of the enterprises’ total income.
If enterprises are eligible for both the 15 percent CIT rate according to the Circular as well as other preferential treatments in accordance with the CIT law, they can enjoy both treatments. Where other reduced tax rates apply, enterprises can choose the lower rate.
The complete Chinese version of the Preferential Catalog for Hengqin New Area can be found here.
The complete Chinese version of the Preferential Catalog for the PCPZ can be found here.
A brief introduction of the three special zones can be found below:
Hengqin New Area, located in the Zhuhai Special Economic Zone in Guangdong Province, is situated next to Macau and is only a stone’s throw away from Hong Kong. Given its geographic advantage, the Hengqin New Area is the first pilot zone of the “one country, two systems” policy and has already attracted over RMB226.3 billion (US$36.4 billion) total investment so far. It is equipped with high-quality development resources and advanced management mechanism, as well as provides the most preferential investment policies in South China.
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Pingtan, located in Fujian province, is situated next to Taiwan and therefore enjoys unique advantages in cross-strait exchange and cooperation. With high-tech and modern service industries introduced from Taiwan, the PCPZ aims at further development in wind power, sea water desalinization and tourism sectors.
The Qianhai Zone was officially approved by China’s State Council on August 26, 2010, with the aim of serving as an experimental business zone for better interaction between Mainland China and Hong Kong in the financial, logistics and IT services sectors. It covers less than 20 square kilometers on the western side of Shenzhen and is expected to achieve a GDP of RMB150 billion by 2020. The Preferential Catalog for the Qianhai zone has not yet to be released, but it is said that the financial industry will not be included.
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