Cross-border taxation: Income tax incentives in Hainan Free Trade Port?

For high-end professionals and rare talents seeking new opportunities, the income tax incentives of the Hainan Free Trade Port may be an incentive not to be overlooked. How will this policy affect your tax liability? This article takes a closer look at the issue, analyzes the key elements of the policy, and provides practical advice on how to take advantage of the incentives. Whether you are a professional already working in Hainan or a talented person considering relocating to this free trade port, this article will provide you with important reference information.

What is the tax policy for Hong Kong residents working in the Mainland?

According to the tax law of the People’s Republic of China, any foreigner who has resided in Mainland China for more than one year is required to file an individual income tax return on his/her worldwide income in China.

However, due to the dual tax treaties between Hong Kong and China, the tax implications for Hong Kong residents working in the Mainland may be different. If you work in the Mainland for not more than 183 days, then you only need to file tax returns for income earned in the Mainland. However, if you work in the Mainland for more than 183 days, then you may need to file a tax return for worldwide income.

Individual Income Tax Concessions in Hainan Free Trade Port

The Hainan Free Trade Port is China’s newest pilot free trade zone and has been recognized as a key development project at the national level. In terms of tax policies, Hainan Free Trade Port has a number of attractive advantages and incentives, including some specific policies on personal income tax.

One of the attractive tax incentives of the Hainan Free Trade Port, especially for high-end and scarce talents, has been clearly stated in the Notice of the General Administration of Taxation of the Ministry of Finance on the Individual Income Tax Policy for High-end and Scarce Talents in the Hainan Free Trade Port.

This policy clearly indicates that, until 2025, high-end and scarce talents of Hainan Free Trade Harbor can be exempted from tax on the excess part of their personal income tax liability as long as the actual tax liability of their personal income tax exceeds 15%.

Moreover, for those who have resided in Hainan for more than 183 days in a tax year and whose income is derived from Hainan’s consolidated income and business income, they will be taxed at the excess progressive rates of 3%, 10%, and 15%, which will continue to be available until 2035.

How can I receive the Hainan Free Trade Port Tax Credit?

This tax credit applies to comprehensive income derived from the Hainan Free Trade Port, including the following types of income:

Wages

Labor remuneration

Remuneration for articles

Royalties

Business income

Income from business and subsidies for talents recognized by Hainan Province.

This preferential policy will be managed by a list of high-end and scarce talents.

According to the “Notice of the People’s Government of Hainan Province on the Provisional Measures for the Management of the List of High-end and Scarce Talents Enjoying the Individual Income Tax Incentive Policy in Hainan Free Trade Port”, high-end and scarce talents enjoying this tax incentive must meet the following conditions:

The workplace is located in Hainan Free Trade Port;

Have signed a labor contract or employment agreement with an enterprise or unit registered and actually operating in Hainan Free Trade Port for a period of more than one year;

Have paid social insurance continuously in Hainan Free Trade Port for more than six months in a tax year (including December of the current year);

An annual assessment will be required to confirm whether the criteria for high-end and scarce talents are still met.

This policy has been implemented from January 1, 2020 and will continue until December 31, 2024. The above information is for reference only. If you have any questions or information on tax return (personal tax return, corporate tax return, accountant tax return), we welcome you to contact our professional advisors and provide you with a free quote and consultation service later.