People's Daily "Reader's Topic": Will Hainan Free Trade Port Become a Tax Haven?

They say many goods in Hainan are cheaper than in the mainland now. Can I buy more and bring them to friends and family? The tax incentive policies for Hainan Free Trade Port are very appealing. Will this place become a tax haven for some companies and certain groups of people?

—People’s Daily Online reader

Previously, there was a widely discussed hot topic online, very similar to this reader’s question. It was rumored that under zero-tariff conditions, you could buy a certain imported car at half price in Hainan, which sparked cheers from many netizens: “So I’ll book a flight and go to Hainan to buy a car.”

It’s true that the zero-tariff policy brings significant benefits and is very tempting, but all kinds of incentive policies come with eligibility conditions. “Cheap” can’t be picked up just anyone can.

Take zero-tariff imported cars as an example. Hainan’s duty-free import car policy applies only to enterprises engaged in transportation and tourism businesses in Hainan. Enterprises must meet compliance requirements in order to be eligible to purchase. The vehicles must be used for business operations, and to ensure that at least one of the origin and destination is within the Hainan Free Trade Port, with the time spent in the mainland each year totaling no more than 120 days.

You can buy various duty-free goods in Hainan, but the policy stipulates that a consumer’s purchase quota within a single calendar year is 100k yuan. For amounts exceeding the annual duty-free shopping quota or limited quantities, import duty on articles entering the country must be paid in accordance with regulations. At the same time, customs reminds that “group purchases” and “purchases on behalf of others” are business activities that use duty-free quotas, and those will be investigated and held legally responsible.

With “eligibility thresholds,” incentive policies will not be abused.

This can clearly answer the reader’s second question: Hainan Free Trade Port is neither willing nor will it become a tax haven.

What is a tax haven? Generally, it refers to places with extremely low or even zero tax rates, lax supervision, and non-public information—regions that mainly attract outside capital to shift profits and evade taxation. And Hainan Free Trade Port, in terms of its development positioning, institutional design, and regulatory framework, does not match these characteristics.

The goal of Hainan Free Trade Port’s tax incentive policies is to serve the development of the real economy, attract domestic and international high-end factors to gather here, and build a high ground for institutional-level openness. It can be said that from the very beginning of policy design, the questions that concerned netizens were also considered by the state.

Tax incentives such as the corporate income tax rate of 15% and the personal income tax with a maximum burden of 15% also have clear eligibility conditions.

The 15% corporate income tax incentive applies only to encouraged industries, and it also requires that the enterprises’ actual management institutions be located in the Hainan Free Trade Port, firmly preventing “shell companies” from arbitraging. If an enterprise is only registered in the Free Trade Port, but any of its production and operations, personnel, accounting, or property is not in the Free Trade Port, it shall not be eligible for this incentive policy.

Personal income tax incentives are only for the high-end, scarce talent that Hainan Free Trade Port truly needs. The talent categories must match the needs catalog, meet the recognized standards, and be jointly recognized by relevant departments. The policy also requires that, under normal circumstances, a taxpayer must have accumulated at least 183 days of residence in the Hainan Free Trade Port within a single tax year, and their taxable income must come from the Hainan Free Trade Port and related sources.

At the end of the day, both companies and individuals need to have “real capabilities and substance” in order to qualify for these policies. Precisely targeted incentive design not only releases the benefits of the policies, but also upholds the bottom line of tax fairness.

Good institutional design requires resolute implementation. Hainan Free Trade Port’s regulatory system is also “smart”—leveraging big data and artificial intelligence, the system can automatically issue early warnings for anomalous cross-border fund transfers and high-risk area transactions. It also uses blockchain technology so that important transactions can be traced end to end. And it exchanges financial account information with more than 100 countries and regions…

On the one hand, Hainan Free Trade Port builds an anti–money laundering system of “institutions + technology + cooperation,” leaving illegal conduct with nowhere to hide. On the other hand, it continues to strengthen cooperation with the international community, promote tax transparency, and crack down on people trying to exploit loopholes.

Since Hainan Free Trade Port was established, it has focused on four major leading industries: tourism, modern services, high-tech industries, and high-efficiency tropical characteristic agriculture. It has attracted a group of enterprises and talent that truly take root in the Free Trade Port and devote themselves to the real economy. The policy effects are gradually being converted into momentum for high-quality development.

With 100 days of full-island customs clearance operations completed, a set of data show the standout achievements of Hainan Free Trade Port: the value of duty-free shopping for departures from the island reached 15.62 billion yuan, up 27.64%; cumulative net increase of 85k business entities, up 39.87%; the total value of foreign trade imports and exports exceeded 80 billion yuan, up 32.9%; and 223k foreign visitors entered visa-free, up 54%… An open and well-ordered Hainan Free Trade Port is not a place for speculators to game the system—it is fertile ground where people who work hard chase their dreams.

This is Hainan Free Trade Port—what it wants is not only “openness,” but also “healthy openness”; what it pursues is not only “vitality,” but also “sustainable vitality.”

（Source: People’s Daily）