Hengqin New Area Announces Preferential Policies

April 4, 2014 Posted by China Briefing Reading Time: 3 minutes

GUANGZHOU – On Mar 27, the Ministry of Finance and State Administration of Taxation jointly issued a Preferential Corporate Income Tax (CIT) Catalog for Hengqin New Area (hereinafter referred to as “Preferential Catalog”), which lists the industries that will be eligible for the preferential CIT rate of 15 percent.

Hengqin New Area, located in the Zhuhai Special Economic Zone in Guangdong Province, is situated next to Macau and 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.

While the standard tax rate on corporate income is 25 percent, eligible enterprises in Hengqin will be taxed at a reduced 15 percent rate, which is very close to what is offered in Hong Kong and Macau.

Enterprises that wish to enjoy the preferential tax rate should meet the following conditions:

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.

Five industries and 72 business categories are included in the Preferential Catalog. Specifically, there are 37 categories in high and new technology industry, including the marine pharmaceutical industry, operational and supporting software development and food safety guarantee technology; thirteen categories on medicine and health, mainly focused on the research and development of new medicines, traditional Chinese medicine and medical equipment. Scientific research constitutes ten categories, while commercial and trade services account for seven categories. The last five categories go to cultural and creative industries, such as game creation, arts and crafts design and digital product development.

The complete Chinese version of the Preferential Catalog can be found here.

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