First batch of Hengqin preferential company and particular person income tax insurance policies introduced

Preferential corporate and individual income tax policies for qualified enterprises engaged in designated industries; domestic and overseas talents; and Macau citizens working in the Guangdong-Macao In-Depth Cooperation Zone in Hengqin have been officially implemented, the Ministry of Finance of China and State Taxation Administration of China announced today (Thursday).

The Guangdong-Macao In-Depth Cooperation Zone administration committee held a press conference today, with its director, Macau SAR Secretary for Economy and Finance Lei Wai Nong, together with deputy directors Nie Xinping, Niu Jing, and Su Kun, and chief accountant of Hengqin Taxation Bureau, Zhang Huibing, detailing the policy highlights and implementation measures.

The Overall Development Plan for Construction of the Guangdong-Macao In-Depth Cooperation Zone in Hengqin, which was released in early September 2021, states that qualified industrial enterprises will enjoy a preferential corporate income tax rate of 15 per cent, while the individual income tax rate for high-end and urgently needed talents in the zone will be capped at 15 per cent.

Lei underlined that this first batch of taxation policies by the country and Guangdong Province will provide policy support and benefits for Macau companies and citizens in Hengqin, creating a taxation environment similar to that of the SAR.

The preferential individual income tax policies provide a similar taxation environment for Macao residents, are aimed at strengthening the economic exchanges between enterprises and residents of the two regions and facilitating the integrated development of Hengqin and Macau, Nie Xinping noted in the press conference.

In addition, the measures will consolidate the industrial foundation for Macau’s moderate economic diversification by benefitting the four key industries of sci-tech research and high-end manufacturing, traditional Chinese medicine along with other signature businesses, industries spanning culture and tourism, conventions and exhibitions, and modern finance.

The expanded scopes of beneficiaries will also attract more domestic and oversea talents to Hengqin, enhance the competitiveness of local enterprises, and boost employment.

Earlier this year, notices by the Department of Finance of Guangdong Province and Guangdong Provincial Tax Service of State Taxation Administration specified qualifications for enterprises and individuals in the Hengqin Cooperation Zone to enjoy tax reductions or exemptions, which will reduce the tax burden for eligible companies and individuals in the zone, narrow the differences in tax burden between Hengqin and Macao, facilitate the Cooperation Zone’s industrial development, and enhance Macao’s moderate diversified economic development. 

A reduced rate of 15 per cent for corporate income tax will also be enforced as a way to attract more market entities, especially Macau-funded enterprises, to participate in the construction of the Cooperation Zone. 

Meanwhile, the portion of individual income tax exceeding 15 per cent for domestic and overseas talents in Hengqin will be exempted.

Macau residents working in the zone will also be exempted from the portion of their individual income tax burden exceeding Macau standards, while their tax burden in Macao shall be calculated with reference to relevant provisions of Macao’s tax laws on occupational and supplementary income taxes.

This is to facilitate Hengqin becoming a new home for Macau people to live and work, and lays a foundation for a new system of high-level integration and opening-up with Macau.

The Hengqin corporate income tax preferential catalogue first introduced in 2021 will also be expanded to include nine categories of 150 items such as integrated circuit design, AI products, and more.

The new tax bracket aims to promote sci-tech research and high-end manufacturing, traditional Chinese medicine along with Macau signature businesses, and industries spanning culture and tourism, conventions and exhibitions, and modern finance.

In 2014, the Ministry of Finance of China and State Taxation Administration of China issued a preferential corporate income tax rate of 15 per cent for encouraged industries in the former Hengqin New Area.

The Preferential Catalogue included the tourism industry in 2019, covering six categories of 80 items with specified main business income accounting for over 70 per cent of the enterprises’ total.

The new corporate income tax catalogue will specify that the main business income should account for 60 per cent of the enterprises’ total, enabling more companies to be eligible for the policy dividends.

Macau’s characteristic industries such as trade brokerage, agency, and service industries between the Chinese mainland and Macau and Portuguese-speaking countries are also included, aiming to strengthen the agglomeration of sci-tech innovation elements, development of the culture, tourism, convention and exhibition industry, and construction of a financial service platform between China and Portuguese-speaking countries. 

To encourage tourism, modern service, and high-tech enterprises in the Cooperation Zone to enhance their international competitiveness, income from the newly added overseas direct investment will be exempted from corporate income tax.

Besides, one-time pre-tax deduction or accelerated depreciation is allowed according to different value ranges for capital expenditure of companies registered in Hengqin, which will help them save costs, expand investment, and promote industrial transformation and upgrades.

In terms of implementation of preferential policies for individual income tax, the scope of beneficiaries has been extended to domestic and overseas qualified talents and urgently-needed talents in the Cooperation Zone with a preferential tax rate capped at 15 per cent, aiming to attract more qualified personnel to Hengqin, Zhang Huibing, noted in the press conference.

More convenient and efficient means of annual settlement for application procedure for individual tax financial subsidies without additional applications are also adopted for taxpayers.

Macao residents working or engaged in businesses in the zone also benefit from the new tax policies.

“For instance, a Macao resident, who was only employed in Hengqin in 2021, earned a monthly wage of about MOP20,000 (US$2,474), which was equivalent to the middle income of Macau residents,’ the committee noted in the press conference statement.

“His annual overall income was about RMB220,000 (US$32,736) calculated by 13 months. In accordance with the relevant provisions of the domestic individual income tax law, his individual income tax payable was about RMB14,000 without considering tax relief. After application of the preferential policies, he only needs to pay individual income tax of about RMB2,300, which is consistent with the corresponding Macao tax burden of this part of income”.

The Cooperation Zone will also develop an online auxiliary system for Macao taxpayers to calculate the tax amount deducted or exempted in line with the preferential individual income tax policies, submit applications online, and receive tax reimbursements without paying an on-site visit to the taxation bureau.