China launched a strategy for furthering opening up to the rest of world and the bridge tower for this state strategy is Hainan province. PKF China already took its initiative to seize such great development opportunity and would love to share such information as well as business opportunities with all PKF family firms.

A.      Backgrounds, laws and polices

Last June, China released a master plan and commit to build the Hainan Island into a globally influential and high-level free trade port by the middle of the century. 

To execute such strategy, Hainan province got full support from central government of China. Comprehensive reforms have been formulated, deepened and high-level opening-up policies are being enforced and a series of incentive policies and laws has been promulgated to support the establishment of an unprecedented free-trade center with the level of openness matching to Hong Kong.

For example, in Hainan, independent tax policies allow cap on both corporates and individuals tax. Furthermore, Hainan now is also the first and the only province allows foreign higher learning institutions to setup INDEPENDENT satellite campuses in China, which is allowed to operate in full independence and encouraged to recruit students from all over the world instead of only Chinese nationals. 

1.     Tax Preferential

On 23 July 2020, the Ministry of finance and the State administration of Taxation released < Notice on Preferential CIT Policies for the Hainan Free Trade Port>.

- A preferential 15% CIT rate applies to enterprises engaged in “encouraged industries”;

- A CIT exemption applies to overseas-sourced income by enterprises engaged in tourism, modern service, and high-tech industries; and

- Pre-tax expenditures may be deducted and depreciation may be accelerated.

2.     Full Investment Guide

On 24 Aug 2020, Hainan International Economic Development Bureau issued 《Hainan Free Trade Port Investment Guide》.

- The investment guide aims to combine the "Overall Plan for the Construction of Hainan Free Trade Port" to fully display the investment policies, investment opportunities, investment areas, investment promotion agencies and other investment elements of the Hainan Free Trade Port; 

- The investment guide shows the current status of the overall investment environment in Hainan Province, introduces an overview of the overall plan for the construction of the Hainan Free Trade Port, the “6+1+4” system design system for the free trade port, the early preferential policies for the overall plan of the free trade port, and the 60 selected dry goods of the trade port policy, as well as contents of Hainan's three leading industries, industrial investment opportunities, city and county profiles, and key parks

3.     New Measures on QFLP

On 13 Nov 2020, China’s Ministry of Finance, the General Administration of Customs, and State Administration of Taxation released <Notice on Hainan Free Trade Port’s Zero-Tariff Policy for Raw and Auxiliary Materials>.

- The notice clarifies that the zero-tariff treatment for raw and auxiliary materials will be subject to a catalogue system, and sets out a list of 169 items. 

- This covers agricultural products (e.g., coconuts, barley, etc.), industrial raw materials (e.g., ores, coal, petroleum oil, liquified natural gas, wood, etc.), chemical raw materials (e.g., xylene, methanol, etc.); preformed-bars for drawing optical fiber; and base-metal mountings, parts and components used for repair of aircraft and vessels (including repairs of relevant parts and components).

- In parallel, there are also compliance requirements. Only those raw and auxiliary materials used exclusively for production by the importer in Hainan free trade port can enjoy the preferential treatment.

4.     Zero-Tariff Products

On 13 Nov 2020, China’s Ministry of Finance, the General Administration of Customs, and State Administration of Taxation released <Notice on Hainan Free Trade Port’s Zero-Tariff Policy for Raw and Auxiliary Materials>.

- The notice clarifies that the zero-tariff treatment for raw and auxiliary materials will be subject to a catalogue system, and sets out a list of 169 items. 

- This covers agricultural products (e.g., coconuts, barley, etc.), industrial raw materials (e.g., ores, coal, petroleum oil, liquified natural gas, wood, etc.), chemical raw materials (e.g. xylene, methanol, etc.); preformed-bars for drawing optical fiber; and base-metal mountings, parts and components used for repair of aircraft and vessels (including repairs of relevant parts and components).

- In parallel, there are also compliance requirements. Only those raw and auxiliary materials used exclusively for production by the importer in Hainan free trade port can enjoy the preferential treatment.

B.      Haikou International Business Mediation Center

To firmly seize the development opportunity in Hainan, PKF China signed a partnership agreement with Haikou International Business Mediation Center early this year. Based on this partnership, PKF China currently have an office in Haikou, which is managed by Kelvin Ma.

The newly formed partnership with Haikou International Business Mediation Center, a Non-for-profit organization sponsored by Haikou municipality, the capitol of Hainan province would allow PKF China to become one of the FIRST and maybe the most authoritative professional firms to interpret and announce the newest favorable policies and laws to the best interest of PKF’s clients across the globe, from tax reduction policies to incentive package terms for FDI.

C.      Making Hainan an “Education Island”, experimental zones dedicated to education

The Chinese government plan to make Hainan an international education/innovation island, aiming for a large number of domestic and international schools and universities to open campuses or full-blown facilities on the island. International brands include The Bielefeld University of Applied Sciences of Germany (FH Bielefeld) and Ecole Hoteliere de Lausanne of Swiss. 

Hainan has accelerated the construction of zones dedicated to international education. For instance, the Lingshui Li'an International Education Innovation Experimental Zone and the Sanya Yazhouwan Science and Education City. It has been common practice for the Chinese government to build new schools and universities into dedicated zones, so called university cities, when planning and building new districts and cities.  

Up to 80 schools and universities & a heavy focus on vocational colleges, engineering and agriculture. Universities and colleges in Hainan will have a focus on offering courses in science, tourism, engineering, agriculture, medicine and vocational training - skills in high demand, and professions China needs for its continued growth. 

D.      PKF CHINA’s participation in Hainan

1.     Education Consulting Services

Education consulting service is one of the specialized services that we provide to educational institutions with international vision and plan to expand/further businesses in China. Our service covers needs from K-12 schools to universities, and from setting up rep office to establishing a satellite campus in China.

Our service include without limitation to,

A.      Preliminary Stage Services:

-        Feasibility report

-        Program introduction

-        Program investment advisory

B.      Grow-up Stage Services:

-        Program design

-        Program management

-        Inter-school Matching Making

-        Global Recruitment

2.     Legal Services

A.    Foreign investment (entity/funds Incorporation, investment and Mergers & Acquisition)

B.    Intellectual Property Right Protection (application and registration, appeal and complaint)

C.    Employment and Human Resource (employment system, labour contract, and internal rules)

D.    Banking and Finance (foreign/shareholder loans, domestic loans)

E.    Commercial Litigation and arbitration 

Should you have any questions, please do not hesitate to contact us (Qin.chen@pkfchina.com). Thank you.