The Hainan Free Trade Port has established a tax system characterized by "zero tariffs, low tax rates, and a simplified tax regime". [Photo/VCG]

The Hainan Free Trade Port has established a tax system characterized by "zero tariffs, low tax rates, and a simplified tax regime", aiming to create an internationally competitive tax environment and attract a diverse array of production factors to the island.

These arrangements aim to promote trade and investment liberalization and facilitation in Hainan, making it easier for international businesses to operate in this hub that connects China with the global market.

I. Zero tariffs

Certain imported goods are exempt from customs duty, import VAT and consumption tax. These exemptions are detailed in three zero-tariff policy lists, covering raw and auxiliary materials, commercial vehicles and yachts, and self-use production equipment.

Once the island-wide special customs operations and simplified tax system are implemented, import tariffs will be waived for all goods entering the Hainan FTP, except those listed in the catalog of dutiable goods.

A business can benefit from the zero tariffs or import duty exemption under the following conditions:

1. Importing self-use production equipment

Applicable equipment

Self-use production equipment necessary for activities such as infrastructure construction, processing and manufacturing, R&D and design, testing and maintenance, logistics and warehousing, medical services, cultural activities, sports and tourism. This includes equipment listed in chapters 84, 85 and 90 of the "Import and Export Tariffs of the People's Republic of China", excluding parts, components and accessories for household appliances and equipment.

Self-use equipment for cultural activities, sports and tourism covers eight new amusement park attractions, including carousels, swings, rotating platforms, roller coasters, water ride equipment and other water park attractions.

The policy follows a negative list management approach. All goods — except those explicitly excluded according to relevant laws and provisions and/or goods prohibited from import according to national regulations, as well as equipment listed on the "Hainan Free Trade Port 'Zero-Tariff' Negative List for Self-use Production Equipment" — are exempt from tariffs, import VAT and consumption tax.

Eligibility requirements

Enterprises and institutions registered in the Hainan FTP with independent legal representatives that import equipment for their own use.

2. Importing commercial vehicles and yachts

Applicable vehicles and yachts

Vehicles and yachts used in commercial transportation and tourism, including 122 8-digit code items listed in the "Hainan Free Trade Port List of 'Zero Tariff' Vehicles and Yachts", including buses, trucks, trailers, aircraft, ships and yachts.

Eligibility requirements

Registered in the Hainan FTP with an independent legal representative

Engaged in commercial transportation or tourism (aviation enterprises must base their operations in the Hainan FTP)

3. Importing raw and auxiliary materials

Applicable products and equipment

The "zero-tariff" import list for raw and auxiliary materials follows positive list management. The "Hainan Free Trade Port 'zero-tariff list of raw and auxiliary materials'" covers 356 8-digit tariff code items, such as coconut, fresh cassava, chloroethene, coal, dimethylbenzene, optical fiber preforms and other raw and auxiliary materials, as well as parts for aircraft and ship maintenance.

Eligibility requirements

Enterprises registered in the Hainan Free Port with an independent legal representative.

4. Import duty exemption for goods with 30 percent or more added value through processing

Applicable areas

The policies apply across the island, not limited to key parks, authorized economic operators (AEOs) or the tariff exemption policy for domestically sold value-added processed goods.

Eligibility requirements

Enterprises within special customs supervision areas (Yangpu Free Trade Port Zone, Haikou Integrated Free Trade Zone and Haikou Airport Comprehensive Bonded Zone): Have independent legal representatives; enterprises in encouraged industries; properly registered; share enterprise production data remotely via the Hainan FTP public service platform in accordance with the methods and data standards recognized by customs; and ensure that submitted data meets customs tax collection and follow-up supervision requirements; 

Enterprises outside special customs supervision areas (Haikou National High-tech Zone and other Hainan FTP key parks): Have independent legal representatives; enterprises in encouraged industries; be representative enterprises with a certain level of foreign trade volume, and meet customs management requirements (AEOs implementing Enterprise Resource Planning management with information systems and real-time connection with customs, including video surveillance measures that meet customs supervision needs). Pilot applications must be submitted to relevant central government departments for approval.

II. Low tax rates

Preferential tax rates are applied to enterprises that are substantively operating in the Hainan FTP and qualified individuals. Income from new overseas direct investment of enterprises is exempt from corporate income tax (CIT).

1. 15 percent CIT rate for enterprises in encouraged industries

CIT for enterprises in encouraged industries, registered and substantively operating in the Hainan FTP, is levied at a reduced rate of 15 percent.

Policy comparison

Eligibility requirements

Enterprises (with independent legal representative) registered in the Hainan FTP, secondary subsidiaries (unincorporated institutions) established in the Hainan FTP, and non-resident enterprises, institutions and production sites established in the Hainan FTP can benefit from this preferential tax policy, provided they meet the following conditions:

Substantive operations

The enterprises' core business is in an encouraged industry, with more than 60 percent of revenue coming from the core business.

2. For high-caliber and urgently needed talent working in the Hainan FTP, the portion of their actual individual income tax (IIT) exceeding 15 percent can be exempted.

Policy comparison

The Hainan FTP's tax system is globally competitive. Only a few areas in the Chinese mainland, including Hainan, Qianhai (Shenzhen), Hengqin (Zhuhai), Nansha (Guangzhou) and Lingang (Shanghai), offer a 15 percent cap on IIT. By comparison, the Hainan FTP's tax system benefits a wider group of people.

Eligibility requirements

Have lived in the Hainan FTP for at least 183 days in a tax year.

Be a talent recognized by talent management departments at any level of government in Hainan province, or have an income in the Hainan FTP exceeding 300,000 yuan in a tax year.

3. CIT exemption for new overseas direct investment income of enterprises in tourism, modern services and high-tech industries

Eligibility requirements

1) Registered in the Hainan FTP

2) Substantive operations

3) The main business is one of the items listed in the "Catalog of Items in the Tourism, Modern Services and High-tech Industries subject to Preferential CIT Treatment in the Hainan Free Trade Port".

Forms of investment applicable

The following four forms of investment as detailed in the "Announcement of the Hainan Provincial Taxation Service on Issue Concerning the Preferential Corporate Income Tax Polices of the Hainan Free Trade Port" are applicable:

1) Newly invested and established subsidiaries overseas

2) Newly invested and established enterprises overseas

3) Increased capital and expanded shares in established overseas enterprises

4) Acquisition of equity interests in overseas companies

Definition of "overseas income"

1) Operating profits obtained from newly established overseas subsidiaries; or dividend income from overseas subsidiaries with a shareholding ratio of 20 percent or more.

2) The statutory CIT rate of the invested country (region) must be no less than 5 percent.

III. Simplified tax system

Upon the implementation of island-wide special customs operations, current VAT, consumption tax, vehicle purchase tax, urban maintenance and construction tax, education surcharge, and other taxes will be simplified and merged according to law. A sales tax will be levied at the retail stage of goods and services trade.

Once island-wide special customs operations are in effect, the tax system will be further streamlined.

Source: 2025 Hainan Free Trade Port Investment Guide