The handbook is designed as a practical starting point for companies, investors, foreign founders, and service providers trying to understand how Hainan FTP rules may affect business setup, tax incentives, customs treatment, trading models, banking, foreign exchange, hiring, and sector licensing.

It covers:

• company setup and registration planning
• 15% CIT and IIT incentives, with conditions
• customs closure, first-line and second-line movement
• zero-tariff and duty-free policy distinctions
• the 30% value-added rule
• banking, EF accounts and foreign exchange cautions
• hiring foreign founders and employees
• sector access and licensing risks
• practical business scenarios and forum FAQs

The handbook is for information purposes only. It is not legal, tax, customs, immigration, banking, or investment advice. Companies should verify current requirements with the competent Hainan authority or a qualified professional adviser before acting.

Registered users can download the handbook here:

Download the Hainan Free Trade Port Handbook 2026

Mission Hills Group, headquartered in Hong Kong, is one of Asia's foremost developers of leisure and lifestyle destinations. Founded by Dr. Chu Shu-hao and chaired by Dr. David Chu, a member of the National Committee of the Chinese People's Political Consultative Conference, the group has spent more than three decades transforming underutilised land into internationally recognised resort communities.

The group's flagship property, Mission Hills Shenzhen-Dongguan, occupies nearly 20 square kilometres on the border of two of China's most dynamic cities. Home to multiple championship golf courses drawing on five continental design traditions, it has grown into one of the world's most comprehensive leisure destinations, hosting over 100 international tournaments and major events in golf, tennis, snooker and cycling, alongside high-profile gatherings including APEC preparatory meetings and the inaugural Straits Exchange Foundation sports exchange. The resort holds China's highest tourism designation (5A) and has twice been awarded the Golf Environment Organization's top prize — sometimes called the "Green Oscar" — as well as the International Association of Golf Tour Operators' Global Best Golf Tourism Resort title.

In 2007, Mission Hills crossed the Qiongzhou Strait and committed more than ¥40 billion to the Yangshan lava field southwest of Haikou — a landscape shaped by volcanic eruptions ten thousand years ago. What was once bare rock is now the Mission Hills Haikou Resort, built around four world-record-scale attractions: the world's largest volcanic rock public golf course, the world's largest volcanic hot spring, the world's largest single-building photography studio, and the world's largest NBA Basketball Park flagship venue.

Anchoring the resort's cultural offer is the Mission Hills Fengxiaogang Movie Town, a film-themed tourism destination developed in partnership with Huayi Brothers and renowned Chinese director Feng Xiaogang. The resort also hosts the China Football (Southern) Training Base — formally designated by the General Administration of Sport and the Chinese Football Association — alongside two full K-12 schools, a resort township, and a full suite of hospitality, healthcare, retail and conference facilities.

Mission Hills has hosted some of golf's most significant moments in China: the 1995 World Cup of Golf (China's first), Tiger Woods' inaugural China visit in 2001, multiple subsequent World Cup editions, and the 2012 WGC-HSBC Champions. In 2025, the Haikou resort hosted a DP World Tour event — the Hainan Golf Elite Championship — marking the group's continued role in bringing elite international competition to the island.

Beyond sport, Mission Hills has contributed nearly ¥600 million to social, cultural and charitable causes across its 30-plus years of operation, supporting over 200 initiatives in sport, education and community welfare.

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Want to Stay in China After Graduation? Hainan Has a Startup Route

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For two decades, establishing a hospital in China meant finding a Chinese partner. That requirement has now been lifted for nine specific locations, and Hainan is the only one where the pilot applies across an entire province rather than a single city. A Singapore-based healthcare group has already signed a cooperation agreement for a 600-bed tertiary facility in Sanya. The window is open and the first movers are moving.

This thread sets out what the pilot permits, what it requires, and how approval works in Hainan.

The Legal Basis

The pilot derives from two instruments issued in late 2024. On September 7, the Ministry of Commerce, the National Health Commission, and the National Medical Products Administration issued a notice permitting wholly foreign-owned hospitals across nine designated locations. On November 1, the National Health Commission, together with the Ministry of Commerce, the National Administration of Traditional Chinese Medicine, and the National Disease Control Bureau, issued the Pilot Program for Expanding the Opening-Up of Wholly Foreign-Owned Hospitals, which sets out the specific conditions and management framework.

Hainan is the only location in the pilot where permission extends across the entire island. The other eight locations are individual cities: Beijing, Tianjin, Shanghai, Nanjing, Suzhou, Fuzhou, Guangzhou, and Shenzhen.

What Is Permitted

Foreign investors may establish wholly foreign-owned hospitals in Hainan -- general hospitals, specialty hospitals, and rehabilitation hospitals -- at tertiary level, on either a for-profit or non-profit basis.

The following are explicitly excluded from the pilot scope:

• Traditional Chinese medicine hospitals
• Acquisition of existing public hospitals
• Psychiatric hospitals
• Infectious disease hospitals
• Hematology hospitals
• Integrated Chinese and Western medicine hospitals
• Ethnic minority medicine hospitals

The following medical activities are prohibited regardless of hospital type:

• Human organ transplantation
• Assisted reproductive technology
• Prenatal screening and diagnosis
• Inpatient psychiatric treatment
• Experimental cancer cell therapy
• Any clinical department registered as hematology

These exclusions are not incidental. They reflect deliberate policy boundaries around human genetic resource security, medical ethics, and the protection of existing public hospital capacity.

Investor Qualification Requirements

Foreign investors must be legal entities capable of independently assuming civil liability. Beyond the legal form requirement, three substantive criteria apply:

First, the investor must have direct or indirect experience in healthcare investment and management. A holding company with no prior healthcare track record does not qualify on its own.

Second, the investor must be able to provide internationally advanced hospital management concepts, models, and service approaches. This is an assessed criterion, not a self-declaration.

Third, the investor must be able to supplement or improve local capacity in medical services, technology, and facilities -- contributing to a diversified healthcare supply system rather than duplicating existing provision.

The policy is explicitly designed to bring in international capability that does not already exist locally. Investors whose value proposition is primarily financial rather than operational are unlikely to satisfy the second and third criteria.

Staffing Requirements

Wholly foreign-owned hospitals may hire foreign physicians, physicians from Hong Kong, Macao, and Taiwan, and other healthcare professionals from Hong Kong and Macao for short-term practice. However, Chinese mainland personnel must account for no less than 50% of both the management team and the healthcare professional staff.

For foreign medical professionals employed in these hospitals, there is an additional benefit available in Hainan. Those whose overseas qualifications are recognised by the relevant industry authorities and who hold a Permanent Residence Permit for Foreigners or a Residence Permit for High-level Overseas Talents may apply for professional title evaluation based on their expertise and work performance under Hainan provincial regulations.

Data and Systems Requirements

Two non-negotiable technical requirements apply to all wholly foreign-owned hospitals:

The hospital's information management system must be connected to the local medical service regulatory platform. Electronic medical records, medical equipment data, and other information storage servers must be physically located within China's territory. Cross-border data transfer of patient records and clinical data is not permitted.

Investors accustomed to operating integrated international health record systems will need to plan for localised data architecture from the outset.

Medical Insurance and Commercial Coverage

Wholly foreign-owned hospitals that meet the relevant criteria may apply for inclusion in China's basic medical insurance designated system. The application is treated on equal terms with domestic public and private institutions -- ownership structure is not a disqualifying factor.

To qualify for medical insurance designation, hospitals must adopt the unified medical service pricing items applicable to medical institutions in their region, implement unified pharmaceutical and medical device pricing policies, accept DRG and DIP payment reform requirements, and submit to full supervision by healthcare security authorities including on-site inspections and intelligent supervision system connectivity.

Hospitals that do not seek insurance designation may set their own prices and operate under standard industry regulation.

Beyond the public insurance system, wholly foreign-owned hospitals are supported in connecting with both domestic and international commercial health insurance providers. For hospitals targeting internationally mobile patients and expatriate populations, commercial insurance connectivity may be the more relevant framework.

The Approval Process in Hainan

The approval pathway in Hainan has two tracks depending on location.

For hospitals outside the Boao Lecheng International Medical Tourism Pilot Zone, applications are submitted first to the municipal or county-level health administrative department for preliminary review, then to the Hainan Provincial Health Commission for final approval. The Provincial Health Commission issues both the Approval for the Establishment of a Medical Institution and the Medical Institution Practice License. The Practice License is valid for five years and is renewable.

For hospitals within the Lecheng Pilot Zone, applications are submitted to the Lecheng Pilot Zone Administration Bureau. The Lecheng Medical and Pharmaceutical Supervision Bureau issues the relevant approvals. The Lecheng pathway benefits from one-stop service coordination and a joint meeting mechanism among health, commerce, administration, and regulatory authorities -- with "one case, one discussion" and "one hospital, one policy" approaches available to resolve specific issues during establishment.

For investors with a healthcare and medical tourism focus, the Lecheng Pilot Zone offers both the most streamlined approval process and the broadest access to Boao Lecheng's existing international medical infrastructure.

The First Mover: Singapore Perennial Holdings, Sanya

Perennial Holdings is a Singapore-based diversified group integrating real estate and healthcare, with operations across China, Singapore, Malaysia, and Indonesia. Its China healthcare network spans 16 cities with over 22,000 beds across general hospitals, rehabilitation hospitals, specialty hospitals, wellness centers, senior care apartments, and nursing homes.

Following preliminary coordination with the Sanya Municipal Health Commission, Perennial has expressed intent to acquire Sanya Guang'anmen Hospital and use the existing site to establish a wholly foreign-owned hospital focused on premium rehabilitation, health management, and eldercare services.

The proposed facility in Haitang District covers approximately 9.27 hectares with a total construction area of 136,144 square meters and is planned for 600 beds at tertiary Class-A standard. The land transfer fee has been paid in full. Phase I construction is substantially complete. On November 8, 2024, Perennial signed a cooperation agreement with Liwang Excellence (Sanya) Health Management Co., Ltd.

The Perennial project is notable not only as the pilot's first major commitment in Hainan, but because it was structured as a proposed acquisition of an existing facility -- a pathway that the pilot explicitly excludes for public hospitals but does not restrict for private ones.

The Strategic Context

By the end of 2023, China had 38,000 hospitals including 3,855 at tertiary level. Public hospitals account for 83.5% of all hospital visits nationwide. The wholly foreign-owned hospital pilot is not designed to compete with that system. It is designed to address what that system does not provide: diversified, internationally benchmarked medical services for China's growing middle class and for the country's substantial and growing expatriate population.

For healthcare investors currently evaluating Asia-Pacific market entry, Hainan's position in this pilot is materially different from the other eight locations. Island-wide coverage, the Boao Lecheng infrastructure, the 15% corporate income tax rate, the Hainan talent policies for overseas professionals, and the existing framework for importing unapproved overseas drugs and devices for clinical use in Lecheng -- these are not available in any of the eight city-level pilot locations.

The combination warrants a serious look.

Source: FTP Enterprise Navigator / Pilot Program for Expanding the Opening-Up of Wholly Foreign-Owned Hospitals, National Health Commission, November 2024 Lead department: Hainan Provincial Health Commission Contact: 0898-65311951 | bgs_yzygj@hainan.gov.cn | No. 38 Haifu Road, Meilan District, Haikou

In 2011, Hainan's offshore duty-free quota was RMB 5,000 per person per year. By 2020, it was RMB 100,000, a twenty-fold increase in under a decade. The per-item cap that used to limit individual purchases was abolished entirely. The number of qualifying product categories expanded from 38 to 45. And the policy was opened to all qualified operators, not just state-designated retailers.

The Legal Basis

The current framework derives from the Announcement on Offshore Duty-free Shopping Policy for Hainan Travelers, issued jointly by the Ministry of Finance, the General Administration of Customs, and the State Taxation Administration, effective July 1, 2020. It implements the Master Plan for the Construction of the Hainan Free Trade Port, which mandated the quota increase and category expansion with State Council approval.

Three taxes are waived in full on qualifying purchases: customs duties, import VAT, and consumption tax.

Who Qualifies to Buy

Any individual aged 16 or above who holds a valid departure ticket from Hainan, by air, rail, or sea, and carries valid identification. This includes:

• Mainland Chinese residents (resident identity card)
• Hong Kong, Macao, and Taiwan travelers (travel documents)
• Foreign nationals (passport)
• Hainan residents themselves, departing the island

The policy explicitly covers residents of Hainan Province. A Haikou resident boarding a flight to Shanghai qualifies on every trip. That detail matters for understanding actual purchase frequency, this isn't limited to tourists passing through.

The Quota Structure

Each eligible traveler receives an annual duty-free shopping quota of RMB 100,000 with no restriction on the number of purchases within that annual limit. The previous per-item cap of RMB 8,000 has been abolished -- a single watch or piece of jewellery at any price point can be purchased within the annual quota.

Quantity limits apply to three categories only:

Everything else in the 45 qualifying categories, including jewellery, watches, bags, eyewear, apparel, and electronics, is limited only by the RMB 100,000 annual quota, not by per-item or per-transaction quantity caps.

Purchases exceeding the annual quota or category quantity limits are subject to standard import taxes on inbound goods.

The 45 Categories

The policy covers 45 product categories including cosmetics, jewellery, luggage, eyewear, apparel and accessories, watches, mobile phones, and alcoholic beverages. The 2020 expansion added seven categories preferred by consumers, with electronic products the most commercially significant addition.

The removal of the single-item price cap alongside the category expansion is the combination that changed the retail economics. A luxury watch at RMB 80,000 now fits entirely within one traveler's annual quota. Previously it would have triggered tax on the amount above the per-item ceiling.

Where Purchases Can Be Made

Qualifying purchases must be made at duty-free shops implementing the policy or through approved online sales channels. Twelve stores in Hainan currently hold qualifying concessions, including:

• China Duty Free Haikou Meilan Airport Duty-Free Store
• China Duty Free Haikou Meilan Airport (Phase II) Departure Duty-Free Store
• China Duty Free Haikou Sun Moon Plaza

The 2020 policy change opened participation to all qualified business entities on equal terms, a deliberate move to introduce competitive pressure into what had previously been a state-monopoly distribution structure.

How Goods Are Collected

Buyers have four collection options:

Standard pickup: Goods are collected at designated pickup points in airports, train stations, or ports before departure, after presenting a shopping voucher.

Immediate pickup: For items priced at no more than RMB 20,000 per unit (excluding tax) and within per-category quantity limits, buyers can collect on the spot at point of purchase without customs inspection at departure.

Postal delivery: If the purchaser, payer, and recipient are all the same departing traveler and the delivery address is outside Hainan Province, the duty-free shop can mail the goods in a single shipment after confirming departure.

Return-to-island pickup: Hainan residents, including those holding a Hainan Identity Card, Residence Permit, or social security card, and foreign nationals with a Hainan residence permit -- who have departed and returned may collect pre-purchased goods at designated pickup points for returning travelers.

The return-to-island pickup option is operationally significant. It means a Hainan-based professional can purchase duty-free goods, leave the island on a business trip, and collect on return. Purchase and collection are decoupled from a single departure event.

The Resale Prohibition

Duty-free goods are classified as final personal-use items of the consumer and cannot be re-entered into the domestic market for resale. The 2020 policy framework strengthened enforcement, defining clear legal responsibilities for individuals, enterprises, and duty-free shops involved in resale or smuggling activity.

This is the constraint that matters for brands assessing grey market risk. The policy design explicitly targets personal consumption, not arbitrage -- and the enforcement framework was tightened precisely because the quota increase made the economics of resale more attractive.

The Retail Market Context

By the end of 2019, before the quota increase, Hainan's offshore duty-free programme had generated 16.31 million shopping transactions and RMB 53.8 billion in duty-free sales since the 2011 pilot launch. The 2020 reforms tripled the annual quota, abolished the per-item cap, and added seven product categories. The sales trajectory since then reflects a market that was deliberately engineered to capture consumer spending that was previously flowing to Hong Kong, Japan, South Korea, and Europe.

For international brands assessing Hainan as a distribution channel: the duty-free concession system is the entry point, and the competitive opening of that system to qualified operators is the structural change that makes it worth evaluating seriously.

Source: FTP Enterprise Navigator / MOF-GAC-STA Announcement on Offshore Duty-free Shopping Policy for Hainan Travelers, effective July 1, 2020 Lead department: Department of Commerce of Hainan Province Contact: 0898-65311802

Once a year, the China International Consumer Products Expo transforms Haikou into the most tax-advantaged retail environment in Asia. Imported exhibits sold during the event, watches, jewellery, cameras, handbags, furniture, are exempt from import duties, import VAT, and consumption tax in their entirety. Not reduced. Exempt.

For brands and distributors currently paying full import tariffs to access the Chinese market, the CICPE window is worth planning around.

The legal basis

The policy is established under MOF-GAC-STA Joint Document No. 32 , issued jointly by the Ministry of Finance, General Administration of Customs, and State Taxation Administration. It implements the Master Plan for the Construction of the Hainan Free Trade Port with State Council approval, this is not a local pilot, it's a nationally authorised exemption.

What's exempt

All three tax layers are waived on qualifying sales:

• Import duties
• Import-related VAT
• Consumption tax

The exemption applies to imported exhibits sold during the exhibition period, within the per-exhibitor quantity and value limits set out below. Exhibits sold above those limits, or unsold exhibits not re-exported after the event ends, are taxed under standard national regulations.

Four categories are excluded regardless of limit: goods prohibited from import by the state, endangered species and their products, tobacco, alcohol, and automobiles.

Per-exhibitor limits by category

The per-item cap on high-value categories, USD 10,000 for watches and jewellery, is the operative constraint for luxury brands. A Rolex at USD 8,000 qualifies. A Patek Philippe at USD 35,000 does not, unless sold outside the preferential window at standard tariff rates.

How exhibits move through the system, the 13 steps

The logistics chain is tightly supervised. This is not a grey area operation, every stage is customs-managed:

1. Overseas exhibits arrive at a domestic port of entry
2. Official exhibition logistics provider submits the import declaration
3. Customs inspection (conducted in a designated inspection area if required)
4. Customs releases the goods on successful inspection
5. Official logistics provider transports exhibits to a customs-designated bonded storage area
6. After exhibitor check-in, logistics provider delivers exhibits to the designated booth
7. Exhibition of products
8. Sales during the exhibition period
9. Exhibition ends
10. On day one of dismantling, exhibitors sort and collect sold exhibits that meet the tax eligibility criteria
11. Exhibitors hand qualifying sold exhibits to the official logistics provider for delivery to a customs-supervised warehouse
12. Official logistics provider assists the exhibitor in submitting the retention purchase declaration
13. Upon declaration completion, retained goods are delivered to the customer's designated location

The critical operational point: sold goods don't go straight to the buyer. They route through a customs-supervised warehouse and a formal retention purchase declaration before final delivery. Build that into your customer communication, the handover happens post-declaration, not on the exhibition floor.

Who manages the exhibit lists

The Hainan International Economic Development Bureau, or its designated entity, submits both the list of participating enterprises and the list of exhibits sold during the exhibition to Haikou Customs in consolidated form. Individual exhibitors don't file directly with customs on this point; your logistics provider handles it.

Contact: Hainan International Business Council, 0898-66538991, Global Trade Window, Guoxing Avenue, Haikou.

What the first CICPE showed

At the inaugural expo, 25 exhibitors sold imported exhibits with a combined value of approximately USD 322,183. Categories included apparel, handbags, infant formula, beef, jewellery pendants, and cosmetics. Small numbers relative to the available limits, which means the exemption headroom for subsequent expos has been largely untouched.

The strategic angle

For brands currently paying 20–60% combined tariff and VAT on imports into China, the CICPE exemption represents a genuine price advantage on a defined volume of product, particularly in the watch, jewellery, and optical categories where the per-item cap still covers a meaningful slice of the range.

For distributors and trading companies, participating as an exhibitor, even with a modest booth, unlocks the exemption for up to USD 20,000 in sales of non-categorised goods. The cost of participation needs to be weighed against the tariff saving on that volume.

The note worth keeping in mind: this policy explicitly applies before the island-wide customs closure comes into full effect. Post-closure, the broader zero-tariff framework for goods circulating within Hainan changes the calculus. For now, the CICPE window remains the clearest annual mechanism for duty-free access to the China consumer market for foreign brands exhibiting in Hainan.

Source: FTP Enterprise Navigator / MOF-GAC-STA Joint Document No. 32 Lead departments: Hainan International Business Council | Haikou Customs District Contact: 0898-66538991

Most operators who've looked at Hainan know about the 15% corporate income tax rate. Fewer have worked through what happens when profits flow back from an overseas subsidiary. In most jurisdictions, that repatriation triggers a top-up tax, the difference between what you paid abroad and what your home jurisdiction charges. In Hainan, for qualifying enterprises, that top-up doesn't apply. The overseas profit comes back clean.

This is one of the more consequential and least-discussed advantages of the Hainan FTP structure. Here's how it works.

The policy in plain terms

Enterprises registered in the Hainan Free Trade Port that derive income from new overseas direct investments are exempt from corporate income tax on that income, provided the investment was made after the qualifying date, falls within the approved industry categories, and meets the structural requirements for what counts as direct investment income.

The operative word is new. Existing overseas investments at the time of Hainan registration don't qualify. The exemption applies to incremental outbound investment made from a Hainan-registered entity going forward.

Three conditions to clear

1. Timing of new investments

The investment must be made after the enterprise is established in Hainan and after the qualifying date set by the policy. Pre-existing overseas holdings don't receive the exemption, only investments initiated from the Hainan entity.

2. The business must appear in the preferential catalogue

Your principal business must fall within the Catalogue of Preferential Corporate Income Tax Policies for Tourism, Modern Services, and High-Tech Industries in the Hainan Free Trade Port. As with the 30% value-added rule, the 60% revenue threshold applies: income from your qualifying main business must account for more than 60% of total enterprise income.

3. The income must qualify as direct investment income

Not all overseas income is covered. The policy specifies two eligible income types:

• Operating profits from newly established overseas branches
• Dividend income from overseas subsidiaries where your ownership stake exceeds 20%, corresponding to the newly added investment

There is one additional condition on the overseas entity itself: the statutory corporate income tax rate in the country or region of investment must be not less than 5%. Investments into zero-tax jurisdictions don't qualify.

What counts as direct investment

Four forms of outbound investment are recognised:

1. Establishing a new branch overseas
2. Establishing a new enterprise overseas
3. Increasing capital or expanding equity in an existing overseas enterprise
4. Acquiring equity in an overseas enterprise

The third and fourth forms are particularly useful. If you already have an overseas entity and a Hainan parent subsequently increases its stake, as in Case 3 below, the exemption applies to the income attributable to the increased stake, not to the pre-existing holding.

How to claim it

The mechanism is self-assessment: you calculate the exemption, declare it in your annual corporate income tax filing, and retain documentation for inspection. There's no pre-approval process.

For resident enterprises, this is reported in Form A108010 (columns 19–26), under "New Overseas Direct Investment Income of Hainan Free Trade Port Enterprises."

For non-resident enterprise institutions, it's reported in Form F200 (line 5 and subordinate lines 6–10), using exemption nature code 04039907.

Filing is handled through the Electronic Taxation Bureau: I want to do tax → Tax Declaration and Payment → Regular Declaration.

Contact: Hainan Provincial Tax Service, 0898-12366, No. 10 Longkun North Road, Haikou.

Three cases that show the actual numbers

The policy authority has published three worked examples. They're worth reading carefully, the tax savings are not trivial.

Case 1: Culture & Communications company, Sanya

A tourism enterprise registered in Sanya in 2020 established a wholly owned subsidiary in Hong Kong in March 2022. The Hong Kong subsidiary earned RMB 500 million in net profit in 2022, paying 16.5% corporate income tax in Hong Kong (RMB 82.5 million).

When the after-tax profit was repatriated to the Hainan parent in 2023, a standard Chinese entity outside a preferential zone would have owed an additional 8.5%, the top-up between Hong Kong's 16.5% and China's standard 25% rate. That would have been RMB 42.5 million.

Under the Hainan exemption: RMB 42.5 million saved on a single repatriation.

Case 2: Cold Chain Logistics company, Yangpu

A modern services enterprise registered in Yangpu in 2020 acquired a wholly owned Hong Kong logistics subsidiary in January 2022. The subsidiary earned RMB 100 million in net profit in 2022 at 16.5% Hong Kong tax.

Standard top-up tax on repatriation: RMB 8.5 million. Under the Hainan exemption: RMB 8.5 million saved.

Case 3: Energy Technology company, Chengmai

This case illustrates the partial exemption when an existing stake is increased. A high-tech enterprise registered in Chengmai in 2021 raised its shareholding in a Hong Kong company from 10% to 30% in January 2022. The Hong Kong company earned RMB 10 million in profit in 2022, distributing RMB 3 million to shareholders in 2023.

The dividend income attributable to the increased 20% stake: RMB 2 million (calculated as 20%/30% × RMB 3 million). The remaining RMB 1 million, attributable to the pre-existing 10%, remains taxable.

Standard top-up on the full RMB 3 million: RMB 255,000. Under the Hainan exemption, only RMB 85,000 is owed (8.5% on the non-exempt RMB 1 million). Tax reduced by RMB 170,000 — and the principle scales linearly with the size of the investment.

What this means structurally

For operators currently using Hong Kong or Singapore as their holding jurisdiction for Asia-Pacific investments, the Hainan structure introduces a different calculus. The question isn't simply "what's the headline tax rate", it's "what happens when profits flow back up the chain."

A Hainan entity holding overseas subsidiaries in jurisdictions above the 5% threshold pays 15% corporate tax on its domestic Hainan income and zero top-up on qualifying repatriated overseas profits. The combination is worth modelling against your current structure.

The constraint, again, is the 60% revenue threshold from encouraged industry activities. This is a serious operating requirement, not a box-ticking exercise. But for businesses whose core activity already falls within tourism, modern services, or high-tech, and who have or plan overseas subsidiaries, the exemption materially changes the economics of where to locate the holding entity.

Source: FTP Enterprise Navigator, Hainan Provincial Tax Service Responsible divisions: Division of Corporate Income Tax and Division of International Taxation Contact: 0898-12366

Every serious operator in the region has heard the headline: manufacture or process goods in Hainan, and they enter the Chinese mainland tariff-free. What almost nobody has read is the fine print. The mechanism that makes this possible, and the conditions that determine whether your operation actually qualifies, matter enormously before you commit to a structure.

This is that fine print, explained plainly.

The core rule

Goods produced within the Hainan Free Trade Port are exempt from import duties when they cross the "second line" into mainland China, subject to one of two conditions:

1. The finished product contains no imported materials or parts at all, or
2. The imported content has been processed to a point where the value added within Hainan is at least 30% of the total material cost

Import VAT and consumption tax still apply — the exemption covers tariffs only. That distinction matters for your landed-cost calculations.

When the pilot started and where it applies now

This wasn't available island-wide from day one. The policy was first piloted on July 8, 2021 in the Yangpu Bonded Port Area, then expanded progressively. As of September 29, 2024, every enterprise in the Hainan FTP that meets the eligibility conditions can participate, inside or outside customs special supervision zones.

The expansion to outside-zone enterprises is significant. It means the policy isn't limited to companies physically inside Yangpu or the Haikou comprehensive bonded zones. If you're registered in Hainan and meet the criteria, you're eligible to apply.

Who qualifies: the three eligibility hurdles

Hurdle 1: You must be a registered Hainan entity with independent legal person status.

A representative office or branch doesn't qualify. You need a properly incorporated entity registered in the FTP.

Hurdle 2: Your main business must be in an encouraged industry, and it must dominate your revenue.

This is where operators get caught out. It's not enough to touch an encouraged industry. The income from your encouraged industry activities must account for more than 60% of total enterprise income. If you're running a diversified operation where processing is one revenue stream among several, you may not clear this bar without restructuring.

To check whether your activity qualifies: domestic enterprises look to the Industrial Structure Adjustment Guidance Catalogue (2024 edition) plus the Hainan-specific encouraged industries catalogue. Foreign-invested enterprises look to the National Encouraged Foreign Investment Industries Catalogue (2022 edition) and the Advantageous Foreign Investment Industries Catalogue for Hainan. Both catalogues are updated periodically, the current version governs.

Hurdle 3: Your customs management setup must be in order — and this differs depending on whether you're inside or outside a special supervision zone.

Inside a customs special supervision zone (Yangpu Bonded Port Area, Haikou Comprehensive Bonded Zone, Haikou Airport Comprehensive Bonded Zone):

• Filed with the zone management authority, with materials, products, and processing technologies approved
• Processing trade goods ledger established
• Production data connected to the Hainan FTP public service management platform in a format customs accepts

Outside a customs special supervision zone:

• Not on the customs dishonesty list
• Processing trade goods ledger established
• Real-time data connectivity with customs
• Video surveillance that meets customs supervision requirements
• Application reviewed by the Hainan Provincial Government and filed with the relevant national ministries

The outside-zone pathway has an additional step — provincial government review before national filing. Build that timeline into your planning.

How the 30% is calculated

The formula differs depending on whether you're inside or outside a supervision zone, but the logic is the same: value added divided by total imported material cost must equal or exceed 30%.

Inside a supervision zone:

(Domestic sales price upon exit − Total overseas imported material cost − Total domestic non-free-zone material cost) ÷ (Total overseas imported material cost + Total domestic non-free-zone material cost) × 100% ≥ 30%

Outside a supervision zone:

(Domestic sales price − Overseas imported material price − Domestic procurement material price) ÷ (Overseas imported material price + Domestic procurement material price) × 100% ≥ 30%

A few definitions worth anchoring:

• Overseas imported material price = transaction price paid by the enterprise, including freight and insurance to the domestic entry point (CIF basis)
• Domestic non-free-zone material price = transaction price for materials purchased from mainland China, including freight and insurance to the Yangpu bonded port area
• Domestic sales price = the transaction price at which goods are sold to buyers outside the zone

The practical implication: companies using significant quantities of mainland Chinese inputs alongside imported materials need to model this carefully. Both categories of external inputs reduce your value-added ratio.

What happens when goods are sold domestically

If your value-added rate clears 30%, tariff exemption applies on exit. Import VAT and consumption tax are still collected.

If your goods don't clear 30%, or if you're selling products domestically that you'd otherwise export, the tax treatment reverts to processing trade rules. For inside-zone enterprises, the selective tariff policy for comprehensive bonded zone domestic sales applies. For outside-zone enterprises, bonded imported materials are declared, customs levies supplementary duties, and deferred tax interest applies.

This two-track outcome makes the 30% threshold a genuine operational decision point, not just a compliance checkbox.

The contact point if you're applying

Lead authority: Haikou Customs District and the Department of Commerce of Hainan Province

• Haikou Customs: 0898-12360 | cpcrk@126.com | No. 61 Binhai Avenue, Haikou
• Commerce Department: 0898-65373056 | 2nd Floor, Provincial Government Office Building, No. 9 Guoxing Avenue, Haikou
• Relevant divisions: Division of Free Trade (Customs) and Division of Free Trade Port Reform and Development (Commerce)

The strategic question this policy answers

If your current structure routes manufacturing or processing through Vietnam, Malaysia, or Thailand to access mainland China tariff exemptions — the Hainan 30% rule warrants a direct comparison. Hainan offers the same tariff exemption mechanism with the additional advantage of the 15% corporate income tax rate and, for qualifying talent, the 15% personal income tax cap.

The constraint is real: the 60% income threshold from encouraged activities means this doesn't work for loosely diversified operations. But for a focused processing or manufacturing play targeting the mainland market, the economics are worth modelling properly.

Source: FTP Enterprise Navigator, Haikou Customs District P.R. China / Department of Commerce of Hainan Province Policy effective island-wide: September 29, 2024