In recent years, the China State Council approved three special areas to promote economic cooperation between the Chinese Mainland and Hong Kong, Macau, and Taiwan. These areas are Hengqin New Area, Qianhai Shenzhen-Hong Kong Services Industry Cooperation Zone, and Pingtan Comprehensive Experimental Zone. Qualified enterprises established in the three areas may enjoy a 15 percent corporate income tax ("CIT") rate, compared to the normal 25 percent CIT rate. The Ministry of Finance and State Administration of Taxation jointly issued Cai Shui [2014] No. 26 on March 27, which clarified the policies for the CIT incentive. Three CIT incentive catalogues were issued, each for one of the three special areas. The catalogues list industry sectors that are eligible for the tax incentives. To be eligible for the 15 percent CIT rate, the main business of the enterprise must falls within the industry sectors listed in the relevant catalogue, which means that more than 70 percent of the total revenue of the enterprise must be derived from one or more listed sectors. Furthermore, if an enterprise has establishments located both inside and outside the special areas, only income derived by the establishments from within the special areas is eligible for the reduced CIT rate. The tax notice is effective for the period from January 1, 2014 to December 31, 2020.

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