Hengqin Cooperation Zone Issues Detailed Guidelines, Clarifying Implementation Path for Corporate Income Tax Incentives
The subsequent release of “the Hengqin Cooperation Zone Corporate Income Tax Preferential Catalogue” (hereinafter referred to as the “Catalogue”) by the Ministry of Finance of China and State Taxation Administration of China and the recently released “Service Guide on Defining Principal Business for Preferential Corporate Income Tax Catalogue in the Guangdong-Macao In-Depth Cooperation Zone in Hengqin” (hereinafter referred to as the “Service Guide”) further refines the scope of eligible industries and business categories, providing clearer guidance for enterprises.
The “Service Guide” breaks down the definition of 377 specific industries and standardize the information collection process for defining the main business, providing enterprises with a clearer operational framework and enabling them to precisely leverage the policy benefits.
Refinement of industry catalogue
The “Service Guide” provides a deeper breakdown of the original 9 categories and 150 industries. A new appendix, “Explanation of Terms and Key Definitions,” expands the 150 industries to 377 specific sub-sectors, clarifying each business definition and criteria. For example, the original catalogue’s Item 119, “Third-Party Logistics and Management,” has been split into “Third-Party Logistics” and “Third-Party Logistics Management,” defining the service scope and revenue type requirements separately to avoid implementation ambiguity.
Breakthrough in defining standards for disputed areas
The “Service Guide” provides clarity in areas where there have long been disagreements. For example, regarding supply chain management (item 122), it mentions for the first time that companies can engage in services such as contract processing and “virtual manufacturing.”
In the section on establishing a two-way open service system for cross-border investment and financing (item 145), the “Service Guide” explicitly includes entities such as QFLP (Qualified Foreign Limited Partner) domestic investment and QDLP (Qualified Domestic Limited Partner) outbound investment, broadening the scope of financial services.
Double threshold for enterprises to comply with regulations and enjoy the preferential scheme
Enterprises must simultaneously meet two core requirements: matching the requirements from the “Catalogue” for their main business, and achieving substantive operational implementation.
For example, at least 60% of their main business revenue must come from industries listed in the catalogue. While for their substantive operational implementations, enterprises are required to localise their personnel, office space, and business and strategic operations within the Hengqin Cooperation Zone. Tax authorities have recently strengthened oversight through on-site inspections.
Optimized classifying procedures, reducing disputes for corporate tax
The “Service Guide” establishes an efficient coordination mechanism. When tax authorities are unsure about the industry classification of an enterprise, they may request a definition from the Commerce and Economic Development Bureau or the Financial Services Development Council. In principle, the corresponding authorities will provide feedback within 30 working days.
While enterprises cannot proactively apply for the definition, they can refer to the “Service Guide” to prepare materials in advance to improve the efficiency of the definition process.
This time’s policy upgrade directly addresses the pain points of businesses. With detailed explanations, precise industry codes, and a clear list of documents, it directly responds to the unclarity in tax policies that often deters enterprises, reduces operational disputes in ambiguous areas, expands the scope of beneficiaries, and optimizes the business environment. It is believed that this new arrangement will help businesses transform past compliance risks into predictable cost advantages in the future, further enhancing Hengqin’s position as a preferred bridge connecting the Greater Bay Area.
