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25 June 2020 China announces masterplan for Hainan Free Trade Port The State Council and the Central Committee of the Communist Party of China jointly announced, on 1 June 2020, the Overall Plan for the Construction of the Hainan Free Trade Port (the masterplan). The masterplan grants greater reform autonomy to Hainan and aims to build it into a globally-influential free trade port (FTP) by the middle of twenty-first century. A more relaxed list of industry sectors for foreign direct investment will be launched for the Hainan FTP, with associated beneficial tax policies.1 Hainan is an island province of China and the nation’s southernmost point with a land area of 35,400 square kilometers and a population of 9 million. The municipality is divided into four prefecture-level cities, five county-level cities and other administrative divisions.2 The 2018 average annual salary in Hainan was RMB75,885 (US$10,700).3
Upon the full launch of the Hainan FTP program (anticipated by 2025), imported goods may be exempt from customs duty or Customs daily supervision (subject to conditions). Goods “imported” from the Hainan FTP into China should generally be subject to customs duty and import level taxes. However, such customs duty may be exempted if the imported goods are manufactured by an enterprise in the Hainan FTP in the encouraged industry sectors, and the manufacturing activity contributed to a minimum 30% increase in the value of the goods. Additionally, certain indirect taxes (including value-added tax, consumption tax, vehicle purchase tax, city construction tax and education surcharge) will be combined into a single indirect tax. Until this is implemented, a sales tax will be introduced and will apply to the retail of goods and services. 2. Data from official website of The People’s Government of Hainan Province https://www.hainan.gov.cn/hn/zjhn/hngl/xzqh/201106/t20110627_442380.html. 3. Data from website of Hainan Provincial Bureau of Statistics http://stats.hainan.gov.cn/tjj/tjfx/ztfx/201906/t20190610_2590852.html#:~:text=%E8%BF%91%E6%97%A5%E6%B5%B7%E5%8D%97%E7%9C%81%E7%BB%9F%E8%AE%A1,%E5%88%86%E5%B2%97%E4%BD%8D%E5%B9%B3%E5%9D%87%E5%B7%A5%E8%B5%84%E6%83%85%E5%86%B5%E3%80%82. _____________________________________________________________________________________________________________ Ernst & Young Tax Services Limited, Hong Kong
Ernst & Young (China) Advisory Limited
Ernst & Young LLP (United States), China Tax Desk
Ernst & Young LLP (United Kingdom), China Tax Desk, London
Ernst & Young LLP (United States), Asia Pacific Business Group, New York
Document ID: 2020-5922 |