Notice on Issuing the Measures for Coordinating and Resolving Disputes over the Substantive Operations of Enterprises (Entities) in the Hainan Free Trade Port

Qiong Shi Jian [2023] No. 40

Purpose

To ensure the effective implementation of Hainan Free Trade Port (FTP) preferential tax policies, 
including corporate income tax incentives for enterprises in encouraged industries and individual income tax incentives for high-end and urgently needed talent, the provincial authorities have jointly issued these Measures for Coordinating and Resolving Disputes over the Substantive Operations of Enterprises (Entities) in the Hainan Free Trade Port.

The measures are designed to establish a unified coordination and resolution mechanism for disputes that arise in determining whether an enterprise or entity has achieved “substantive operation” (实质性运营) as required for enjoying FTP preferential policies.

Policy Basis

The formulation of these measures is based on the following key documents:

1. Overall Plan for the Construction of the Hainan Free Trade Port
2. Notice of the Hainan Provincial People’s Government on Issuing the Interim Measures for the Management of the List of High-End and Urgently Needed Talents Eligible for Individual Income Tax Preferences in the Hainan Free Trade Port
3. Announcement of the Hainan Provincial Tax Service, State Taxation Administration, Hainan Provincial Department of Finance, and Hainan Provincial Administration for Market Regulation on Issues Concerning the Substantive Operations of Enterprises in Encouraged Industries in the Hainan Free Trade Port (2021 No. 1)
4. Supplementary Announcement on Issues Concerning the Substantive Operations of Enterprises in Encouraged Industries in the Hainan Free Trade Port (2022 No. 5)

Main Content

The Measures establish a joint inter-departmental mechanism to coordinate and resolve disputes regarding the determination of an enterprise’s “substantive operation” status.
Participating authorities include market regulation, development and reform, commerce, finance, human resources and social security, public security, and taxation departments at both the provincial and municipal levels.

Key objectives include:

• Ensuring consistent application of the substantive operation standards;
• Providing a formal channel for enterprises to appeal or seek clarification on disputed determinations;
• Improving coordination among departments involved in policy enforcement; and
• Enhancing transparency and fairness in the implementation of FTP preferential tax policies.

Implementation

All relevant departments at the city, county, and autonomous-county levels are instructed to:

• Establish corresponding coordination mechanisms;
• Implement the measures in line with the joint provincial framework;
• Actively guide and assist enterprises in understanding and complying with substantive operation requirements; and
• Promptly handle and report dispute-resolution outcomes to ensure policy consistency across the province.

Effective Date

Issued on April 26, 2023, the Measures for Coordinating and Resolving Disputes over the Substantive Operations of Enterprises (Entities) in the Hainan Free Trade Port take effect upon promulgation.

Issuing Authorities:
Hainan Provincial Administration for Market Regulation
Hainan Provincial Development and Reform Commission
Hainan Provincial Department of Commerce
Hainan Provincial Department of Finance
Hainan Provincial Department of Human Resources and Social Security
Hainan Provincial Public Security Department
Hainan Provincial Tax Service, State Taxation Administration

Date: April 26, 2023