SCIO press conference on development of Hainan Free Trade Port

Jimu News:

The Master Plan for the Development of Hainan Free Trade Port proposes that the institutional system of liberalization and facilitation with zero tariff as basic feature be applied to trade in goods. Could you introduce the changes in the tax policies for goods after the implementation of the special customs operation Thank you.

Liao Min:

Thank you for your question. This issue has already been addressed by my colleague in his introduction earlier. I will further elaborate from a fiscal perspective. Zero tariff is one of the major features of the Hainan FTP's policy and institutional system. In recent years, the Ministry of Finance has earnestly implemented the decisions and arrangements of the CPC Central Committee and the State Council, taken into full account the actual situation in Hainan, and worked with relevant departments to successively introduced three import zero-tariff policies for raw and auxiliary materials, means of transport and yachts, and production equipment imported by enterprises for own use. Therefore, we have gained a series of phased results through our earlier practices. These have injected new momentum into the high-standard opening up of Hainan FTP, and provided valuable experience for the island-wide special customs operation and related management in the next step.

In order to steadily promote the island-wide special customs operation of Hainan FTP, the MOF has carefully summarized the relevant practical experience in the early stage, and has also taken into account factors such as the free trade port development progress, the industrial conditions, and the conditions of regulatory software and hardware. We have taken the lead in formulating the tax policies for goods entering and exiting "first-line" and "second-line" ports and circulating within the island, as well as the catalog of imported taxable commodities at Hainan FTP. These policies are scheduled to take effect upon the launch of the island-wide special customs operation. At that time, the existing zero-tariff policy for imports will be incorporated into the new goods tax policies for implementation, basically establishing the zero-tariff system for imports in Hainan FTP. 

After the introduction of the special customs operation, the main arrangements for goods tax policies will be as follows: Independent legal entity enterprises registered in Hainan FTP, as well as eligible public institutions and private non-enterprise units within the free trade port, can be exempted from import taxes on goods imported through the first-line ports that are not listed in the catalog of imported taxable commodities. Zero-tariff goods and their processed products can circulate among entitled entities within the island without being subject to import taxes. For goods produced by enterprises in encouraged industries of Hainan FTP, when the value-added through processing in Hainan reaches or exceeds 30%, they can be exempted from import duties when entering the Chinese mainland through the second-line ports. Compared to the policies before the introduction of the special customs operation, there are three significant changes.

First, the coverage of zero-tariff goods has significantly expanded. After the island-wide special customs operation, zero-tariff imports will be managed under a negative list system, replacing the previous positive list with the catalog of imported taxable commodities. The range of zero-tariff goods will expand from the current 1,900 tariff lines to about 6,600, accounting for about 74% of all taxable goods, with an increase of nearly 53 percentage points compared with the level before the implementation of the special customs operation. Therefore, you can see that this has significantly enhanced the scope and level of openness.

Second, the scope of entitled entities has also significantly expanded. Currently, the zero-tariff import policy is limited to independent legal entities and public institutions registered in Hainan FTP. After the launch of the island-wide special customs operation, the entitled entities will basically cover all types of enterprises, public institutions and private non-enterprise units with actual import needs across the island.

Third, policy restrictions have been further relaxed. After the launch of the special customs operation, zero-tariff goods and their processed products will no longer be limited to enterprises' own use. They can freely circulate among entitled entities without the need to pay additional import taxes. This has positive significance for extending the island's industrial chain, enhancing industrial competitiveness and forming an industrial cluster effect.

Overall, the above policies are conducive to further reducing the production costs of market entities, stimulating market vitality, and significantly improving the level of trade liberalization and facilitation in the Hainan Free Trade Port. Subsequently, the Ministry of Finance will continue to monitor the implementation of relevant policies, with particular focus on the sense of benefit of market entities, to timely optimize and adjust policy content. We will also work with the Hainan provincial government to enhance services for market entities. At the same time, we will also strengthen management and continuously promote the construction of the Hainan Free Trade Port, including elevating China's high-standard opening up to yield new outcomes. That's all for my answer. Thank you.