Four Departments have Issued a Document to Clarify Key, Difficult, and Focus Issues of Individual Income Tax Preferential Policies in Hainan Free Trade Port.
In order to implement the “Overall Plan for the Construction of Hainan Free Trade Port” and promote the implementation and effectiveness of the individual income tax preferential policies in Hainan Free Trade Port, the Provincial Department of Finance, the Provincial Taxation Bureau, the Provincial Committee of Talent Development, and other departments jointly issued the “Notice on Issues Related to the Implementation of Individual Income Tax Preferential Policies for High-end and Scarce Talents in Hainan Free Trade Port”.
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This “Notice” further elaborates on key, difficult, and focus issues that were not thoroughly explained in the Circular No. 32 of Finance and Taxation and the Measures No. 41, clarifying the policy direction of “income derived from Hainan Free Trade Port”, the calculation method of tax reduction and exemption amount, the process of generating the list of high-end scarce talents, as well as the management service measures and dispute resolution methods of relevant departments, maximizing the release of policy dividends.
The full text of the “Notice” and relevant issue clarifications are as follows:
Income Derived from Hainan
Income derived from Hainan refers to the comprehensive income obtained by high-end scarce talents in Hainan (including wages, remuneration for labour services, royalties, franchise royalties, income recognized by Hainan Province for talent subsidies), and corresponding taxes are paid in Hainan. Specifically:
- Wages and salaries refer to the income obtained by individuals from employment in Hainan, including wages, salaries, bonuses, year-end bonuses, labour dividends, allowances, subsidies, and other income related to employment.
- Income from labour services refers to income obtained by individuals from providing services in Hainan.
- Royalties refer to income obtained by individuals from the publication or release of their works in the form of books, newspapers, etc., in Hainan.
- Income from franchise royalties refers to income obtained by individuals from providing the right to use patents, trademarks, copyrights, non-patented technologies, and other franchise rights in Hainan.
- Operating income refers to income obtained from production and business activities in Hainan.
Income recognized by Hainan Province for talent subsidies is confirmed based on the recipients and distribution methods. Income related to employment is included in comprehensive income, while income related to production and business activities is included in operating income.
Calculation of Tax Reduction and Exemption Amount
High-end scarce talents in Hainan calculate the tax reduction and exemption amount of individual income tax policies in Hainan according to the following methods:
(1) Calculation of Tax Reduction and Exemption Amount for Resident Individuals’ Comprehensive Income
Tax reduction and exemption amount = (Taxable amount of comprehensive income – Taxable income amount of comprehensive income × 15%) × Hainan comprehensive income amount ÷ Comprehensive income amount (Formula One)
(2) Calculation of Tax Reduction and Exemption Amount for Resident Individuals’ Operating Income
Tax reduction and exemption amount = (Taxable amount of operating income – Taxable income amount of operating income × 15%) × Hainan taxable income amount of operating income ÷ Taxable income amount of operating income (Formula Two)
(3) Calculation of Tax Reduction and Exemption Amount for Non-resident Individuals’ Related Income
Tax reduction and exemption amount for non-resident individuals’ wages and salaries income = (Taxable amount of wages and salaries income – Taxable income amount of wages and salaries income × 15%) × Hainan wages and salaries income amount ÷ Wages and salaries income amount (Formula Three)
Tax reduction and exemption amount for non-resident individuals’ income from labor services, royalties, and franchise royalties = Hainan taxable amount – Hainan taxable income amount × 15% (Formula Four)
Tax reduction and exemption amount for non-resident individuals’ operating income = (Taxable amount of operating income – Taxable income amount of operating income × 15%) × Hainan taxable income amount of operating income ÷ Taxable income amount of operating income (Formula Five)
Identification of High-end and Scarce Talents
The Provincial Committee of Talent Development, based on the information on high-end and scarce talents available, shall submit the preliminary proposed list of high-end and scarce talents to the taxation, development and reform, and social security departments before the end of December each year.
The Provincial Taxation Bureau, in accordance with the “Interim Measures for the Management of High-end Scarce Talents List Enjoying Individual Income Tax Preferential Policies in Hainan Free Trade Port” (hereinafter referred to as the “Measures”), shall verify the list against the income standards stipulated in the Measures.
The development and reform, and social security departments shall verify the creditworthiness and social security contributions of the talents on the preliminary proposed list using platforms such as the Hainan Free Trade Port “Credit Sharing” platform and the Hainan social security registration system.
Individuals subject to joint punishment due to dishonesty and those who do not meet the social security payment and income conditions stipulated in the Measures shall not be identified as high-end and scarce talents.
After verifying the preliminary proposed list according to their respective responsibilities, the aforementioned departments shall provide feedback on the verification information to the Provincial Committee of Talent Development by the end of January of the following year. The Provincial Committee of Talent Development shall provide the final list of high-end and scarce talents to the Provincial Taxation Bureau before February 15 of the following year.
After the Provincial Committee of Talent Development and the Provincial Taxation Bureau have finalized the list of high-end and scarce talents, they shall inform them appropriately and provide talent identity inquiry services through the provincial-level talent service “one-stop” network platform and talent service windows.
Tax Collection Management and Services
Individuals confirmed as high-end and scarce talents, who are eligible to enjoy the preferential policies for the aforementioned income derived from Hainan, shall handle the annual tax refund for their operating income from January 1st to March 31st of the following year and comprehensive income from March 1st to June 30th of the following year in Hainan.
Non-resident individuals who cannot enter the country during the above period may entrust tax professional service organizations, other entities, or individuals to handle the procedures on their behalf, or apply for confirmation of their high-end and scarce talent status to the Provincial Committee of Talent Development through the Provincial Taxation Bureau at least 30 days before departure.
The Provincial Committee of Talent Development shall confirm whether they belong to high-end and scarce talents within 10 working days, with cooperation from the development and reform, and social security departments. Those confirmed as high-end and scarce talents shall have their tax refund processed by the tax authorities according to the above regulations.
High-end scarce talents should retain proof of labour relations such as labour contracts or employment agreements with substantial operating enterprises or units in Hainan for more than 1 year within 5 years.
The Provincial Taxation Bureau, based on the list provided by the Provincial Committee of Talent Development and relying on the electronic taxation bureau, shall provide related services for enjoying tax reduction and exemption policies to taxpayers confirmed as high-end scarce talents.
Departments such as talent management, social security, and taxation shall strengthen mid-term and post-event supervision, jointly conduct random inspections on high-end scarce talents enjoying personal income tax preferential treatment. The Provincial Committee of Talent Development and the Provincial Market Supervision Administration shall respectively take the lead in handling relevant dispute resolution work according to their work functions, and actively cooperate with the tax authorities to implement personal income tax preferential policies.
Suggestions and opinions on the implementation should be promptly reported to the corresponding provincial competent departments for research.
Hainan Provincial Department of Finance
State Taxation Administration of Hainan Province, Taxation Bureau
Hainan Provincial Market Supervision Administration
Communist Party of China Hainan Provincial Committee of Talent Development
December 15, 2020
Q: How can one determine whether they are on the list of high-end scarce talents eligible for preferential treatment?
A: On one hand, the Provincial Committee of Talent Development will notify individuals identified as high-end scarce talents through either a letter titled “To High-end Scarce Talents in Hainan Free Trade Port” or via text message. Alternatively, high-end scarce talents can verify their status during the annual tax settlement period by submitting relevant materials online or offline through the provincial talent service “one-stop” platform. This platform can be accessed at the Hainan Provincial Government Service Centre, located on the second floor of the hall at No. 3 Wuzhishan South Road, Meilan District, Haikou City. Additionally, verification can be completed through the website: https://wssp.hainan.gov.cn/hnwt/.
Q: Who determines whether high-end scarce talents working in Hainan Free Trade Port have continuously paid basic endowment insurance and other social insurance for more than 6 months (including December of the current year) within one tax year?
A: It is determined by the Provincial Social Security Bureau through the Hainan social security registration system. They conduct checks on social security contributions and annotate individuals who do not meet the social security payment conditions.
Q: What if high-end scarce talents working independently in Hainan Free Trade Port cannot provide proof of labour relations, such as labour contracts or employment agreements, for more than one year?
A: For high-end scarce talents independently engaged in production and business activities in Hainan Free Trade Port who cannot provide labour contract or employment agreement materials for more than one year, they should provide proof of continuous 6-month social security contributions and annual personal income tax payment records.
Q: Who determines cases of joint punishment for individuals identified as high-end scarce talents working in Hainan Free Trade Port in the event of dishonesty?
A: It is determined by the Provincial Development and Reform Commission through the Hainan Free Trade Port “Credit Sharing” platform, where credit checks are conducted, and individuals subject to joint punishment for dishonesty are annotated.
Q: How do high-end scarce talents who meet the criteria enjoy personal income tax preferential policies during the annual tax settlement period?
A: The Provincial Taxation Bureau, based on the list provided by the Provincial Committee of Talent Development, manages the “white list” in the information management system. They provide tax reduction and exemption amount calculation and pre-filing services for taxpayers eligible for preferential treatment, allowing taxpayers to enjoy personal income tax preferential policies “upon settlement.”
Q: What preparations are required for high-end scarce talents working in Hainan Free Trade Port to enjoy personal income tax preferential policies?
A: Taxpayers must ensure that the income information they provide through the individual tax app, withholding client, WEB client, etc., is true, complete, and reliable, facilitating tax authorities to provide tax calculation and pre-filing services.
Q: If high-end scarce talents have objections to the list, how can they resolve them?
A: They can resolve objections by submitting relevant materials online or offline through the provincial talent service “one-stop” platform during the annual tax settlement period.
Q: If taxpayers have questions about personal income tax preferential policies, how can they communicate with the tax authorities?
A: Firstly, they can call the 12366 tax service hotline, where the tax department provides “audible tax services” to provide taxpayers with consultation, answers, and business guidance. Secondly, they can use the online consultation and intelligent consultation services available on the Hainan Provincial Taxation Bureau’s portal website and WeChat official account. Thirdly, they can visit the tax authorities at the location of their unit or their personal residence for on-site consultation.
Related article: Compilation of important policies for Hainan Free Trade Port (February 2024)
