China’s 15% FTZ Tax Break Comes With Fine Print

FTZ News: China Briefing’s Oct. 6 note on free-trade zones, by Giulia Interesse, is a list of who gets a tax break and who does not. The count is 23 pilot zones plus the Hainan Free Trade Port. These are domestic policy zones, not a trade treaty. The breaks stop at the boundary of a sub-area. A city name on the letterhead does not put a firm inside.

The barred list inside the zones has 27 items. The national list has 29. A 2025 market-access list still has 106. A foreign firm can register if the business is not on those lists, the address is inside the sub-area, and the industry licenses are in hand. Bonded storage, processing, repair and entrepot trade apply only in special customs areas. Most zone land is not bonded.

The 15 percent corporate rate, against the usual 25 percent, is what firms ask about. It is not zone-wide. Hainan runs it through Dec. 31, 2027, for encouraged industries that get at least 60 percent of revenue from the catalogue and keep real operations in the zone. Shenzhen Qianhai and Zhuhai Hengqin have the same end date and the same 60 percent test. Guangzhou Nansha’s 15 percent runs through Dec. 31, 2026, with a 13-year loss carry-forward for high-tech firms. Shanghai Lingang’s 15 percent is five years from setup, dating from Jan. 1, 2020, for integrated circuits, artificial intelligence, biomedicine and civil aviation. Western zones can use the western-development 15 percent through Dec. 31, 2030, again with the 60 percent test. High-and-new-technology status can get 15 percent outside the zones too.

Hainan has its own rules. Zero tariffs on 6,600 lines, 74 percent of the tariff book, took effect Dec. 18, 2025. Duty-free sales onto the mainland need 30 percent local value added. The individual-tax cap wants 183 days in the tax year, or a labor contract, recognized talent or 300,000 yuan a year, and income sourced in the zone.

Since Aug. 1, 2024, local tax rebates and subsidies without a legal basis are barred. A cluster registration will not pass the operations test. Sector pilots still need the firm in the named area and a regulator’s approval. Value-added telecom pilots date from October 2024, biotech from September 2024. Data-transfer lists in nine zones and Hainan, as of June 2026, cover 28 sectors. The note says 200 administrative changes from 2021 to 2025 were copied nationwide. A copied form is not the 15 percent rate./.