The standard corporate income tax rate in China is 25%. The most attractive preferential tax policies available in Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone (hereinafter referred to as Qianhai) is to impose a reduced 15% corporate income rate on eligible enterprises in Qianhai.

Lots of investors want to register their companies in Qianhai to enjoy Qianhai preferential corporate income tax policy. However, before making the decision to register a company in Qianhai, the investors should fully understand the detailed requirements and contents of Qianhai preferential corporate income tax policy. If the company cannot meet the required conditions upon incorporation, then it will not be able to enjoy Qianhai preferential corporate income tax policy. To ensure that the company can enjoy Qianhai preferential corporate income tax policy, the investors and the company should perform self-assessment and complete the following steps:

Step 1: Assess whether the company mainly engages in the business sectors specified in the Catalogue of Preferential Corporate Income Tax in Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone (2021 Edition), and the revenue derived from its core business account for at least 60% of its total revenue.

The business sectors specified in the Catalogue of Preferential Corporate Income Tax in Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone (2021 Edition) cover 5 industries as follows:

1. modern logistics industry
2. information service industry
3. science and technology service industry
4. cultural and creative industry
5. commercial service industry

Step 2: Assess whether the registered address of the company is located in the expanded Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone (with a total area of 120.56 square kilometers). The expanded Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone covers the following areas:

1. the initial Qianhai area (14.92 square kilometers)
2. Shekou area and areas surrounding the Dananshan and Xiaonanshan mountains (22.89 square kilometers)
3. Convention and exhibition new city and ocean new city area (29.36 square kilometers)
4. airport and the surrounding area (30.07 square kilometers)
5. Baoan central district and Dachan bay area (23.32 square kilometers)

Step 3: Assess whether the company meets the conditions for substantial operation in Qianhai.

Substantial operation in Qianhai requires that the production and/or operation, personnel, finance and property of the company are all located in Qianhai. If a company is registered in Qianhai only, whose production and/or operation, personnel, finance or property are not located in Qianhai, it will not be considered to have substantial operation in Qianhai and thus cannot enjoy the reduced corporate income tax rate of 15%.

Step 4: If the company meets the conditions for enjoying the preferential corporate income tax after self-assessment, it can declare and enjoy tax benefits during the quarterly corporate income tax filings and annual corporate income tax reconciliation.

Step 5: Upon completion of the annual corporate income tax reconciliation, the company should retain documents and materials supporting its substantial operation in Qianhai, corresponding contracts for revenue derived from its core business, and so on for post-filing inspections from the competent tax bureau.

KAIZEN Group is equipped with experienced and highly qualified professional consultants and is therefore well positioned to provide professional advices and services in respect of the formation and registration of company, application for various business licences and permits, company compliance, tax planning, audit and accounting in China. Please call and talk to our professional consultants for details.