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Hengqin clarifies the requirements of enterprises' substantive operation

In order to boost the development of the real economy in Hengqin and Macao's adequate economic diversification, on February 14, the Tax Bureau, Finance Bureau, Commercial Service Bureau, Economic Development Bureau and Financial Development Bureau of the Cooperation Zone jointly issued the Announcement on the Substantive Operation of Qualified Industries and Enterprises in the Guangdong-Macao In-Depth Cooperation Zone in Hengqin (hereinafter referred to as the Announcement) to clarify the specific requirements for the substantive operation in the Cooperation Zone.

(Photo / Nanfang Daily)

According to related rules, the Cooperation Zone's eligible enterprises can enjoy a corporate tax rate of 15 percent, and their main business shall be listed in the Preferential Catalogue of Enterprise Income Tax in Guangdong-Macao In-Depth Cooperation Zone in Hengqin (2021 edition). Besides, they should have substantive operations in the Zone, which means their production or operation, personnel, accounting treatment, and property are all required to be in the Zone.

The latest Announcement clarifies the specific matters about the substantive operations, so that enterprises can enjoy preferential tax policies with more transparent standards.

For example, as for "personnel in the Zone", the Announcement stipulates that "according to the size of the enterprise and the number of its employees, in a taxable year, the enterprises should have at least 3 to 30 employees who pay social insurance, such as endowment insurance, for at least six months in the Zone."

Enterprises show confidence in Hengqin's industrial development

Recently, the Cooperation Zone proposed that it will implement three major projects that involve industrial development, regulatory convergence, and livelihood integration to promote the high-quality development of the economy this year.

The substantive operation of enterprises will boost the Zone's genuine economic development and help to build a new industry linkage development model of "Macao as platform + international resources + Hengqin space + results sharing".

According to statistics, in 2022, the number of enterprises operating in the Zone increased by 39 percent year-on-year, with an average of about 400 new tax-related market entities per month, of which 77.38 percent were newly registered enterprises in the four major industries. More than 5,300 Macao-funded enterprises have registered and operated in the Zone, a year-on-year increase of about 11.8 percent, and the total registered capital has exceeded 140 billion RMB.

Hengqin Lutan Information Service, a Macao-funded company based at Hengqin International Financial Center, has received a tax reduction and exemption of 1.3 million RMB of corporate income tax. It mainly provides information technology support and management for Macao and overseas enterprises. The company's representative also praised the importance of the substantive operation.

"Substantive operation gives us a more stable expectation for continuing to enjoy preferential tax policies, which is good for the development of industries and enterprises in the Zone," said Zhong Xiajing, financial director of Hengqin Lutan Information Service.

She said they have about 500 employees working in Hengqin, and the company has more than 120 million RMB of offshore service revenue every year. Through the government's action of facilitating taxation, it is more convenient for the company to enjoy preferential tax policies. "The Zone's industrial orientation and policy environment have strengthened our confidence for further development," said Zhong.

Author: Pamela (Intern)

Editor: Wing, Olivia, Will, James

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