Hainan’s 15% Corporate Income Tax: Who Qualifies?

Hainan’s 15% corporate income tax rate is one of the Free Trade Port’s best-known incentives. It is also one of the most frequently overstated.

Registering a company in Hainan does not automatically reduce its tax rate from China’s standard 25% to 15%. The company must satisfy industry, revenue and substantive-operation requirements.

How long is the 15% rate available?

The preferential corporate income tax policy has been extended through 31 December 2027.

That date matters for financial planning, but it should not be read as a promise that every qualifying business will lose the benefit afterwards. Future treatment depends on policies issued for the next period. Build forecasts using the rules currently in force and keep a separate scenario for later years.

Test 1: The main business must be encouraged

The company’s principal activity must fall within an applicable encouraged-industry catalogue. The Hainan framework draws from national catalogues and the Hainan Free Trade Port Encouraged Industries Catalogue.

The catalogue covers many areas, including selected modern services, technology, tourism, healthcare, agriculture, manufacturing and trade-related activities. Eligibility is determined by a specific catalogue entry, not by a broad marketing description.

For example, calling a company “technology consulting” does not prove that its actual revenue-generating service fits an encouraged entry. The contracts, invoices, staff and work product should tell the same story as the claimed category.

Test 2: Encouraged-business revenue must exceed 60%

Revenue from the qualifying main business generally needs to exceed 60% of the company’s total revenue.

This makes revenue mix an annual operating issue, not a one-off registration decision. A company may begin with an encouraged activity but later add unrelated services that change the ratio.

Track revenue by activity and keep the underlying contracts, invoices and accounting classification. If several activities are close to one another, obtain a written analysis of which income belongs to the qualifying business.

Test 3: The company must operate substantively in Hainan

The incentive is intended for real Hainan operations, not address-only companies.

Substantive-operation analysis can consider where the company carries out production or services, where staff work, where management decisions are made, where accounts and records are maintained, and where assets are used.

A serviced address can solve a registration need. It does not by itself prove that the company’s real business is in Hainan.

For a foreign founder, useful evidence may include:

• Hainan-based employees and payroll;
• local management activity;
• customer and supplier contracts performed through the Hainan company;
• accounting records and bank activity consistent with the business;
• office, equipment or other operational assets; and
• decision-making records showing actual control from Hainan.

Does foreign ownership affect eligibility?

The 15% rate is based on the enterprise and its activity, not on whether the shareholders are Chinese or foreign. A wholly foreign-owned company can qualify if it satisfies the same requirements.

Foreign ownership does create additional formation, reporting, banking and cross-border tax issues, but it does not disqualify the company from the Hainan rate.

Can a holding company qualify?

A pure holding or shell structure should not assume eligibility. The company still needs an encouraged main business, qualifying revenue and substantive operations.

Headquarters, investment and modern-service activities may fall within relevant catalogues in certain circumstances, but the exact function and income need to be matched to the policy. “Regional headquarters” on a presentation slide is not enough.

What happens if the company fails a test?

If the company does not meet the conditions for a tax year, it should not apply the 15% rate for that year merely because it qualified previously or expects to qualify later.

This is why tax eligibility should be reviewed before incorporation and monitored during operation. The business scope, catalogue analysis, contracts and accounting should be aligned, but they must also reflect reality.

Questions to ask before relying on the rate

1. Which exact catalogue entry covers the main business?
2. How will the company prove that more than 60% of revenue comes from it?
3. Which staff, assets and management functions will be in Hainan?
4. Where will contracts be performed and records kept?
5. Is the benefit included in forecasts only for the current policy period?

If an adviser cannot identify the catalogue entry and the evidence needed for the other two tests, the tax estimate is not ready to use.

Related reading

• China corporate tax for foreign companies
• How to set up a company in Hainan Free Trade Port
• Annual compliance for a foreign-owned company in Hainan

Official sources

• Extension of Hainan corporate income tax incentives through 2027
• Hainan Free Trade Port Encouraged Industries Catalogue
• State Taxation Administration guidance on the 60% test
• 2026 Hainan Free Trade Port Investment Guide

Tax qualification depends on the company’s real activity and evidence for each tax year. Obtain a case-specific assessment before using the 15% rate in an investment decision.

Read our editorial standards and corrections policy