On 24 April 2023, the Taxation Bureau, Finance Bureau, Economic Development Bureau and Market Regulatory Bureau of Fujian Pingtan Comprehensive Pilot Zone jointly issued the Public Announcement Regarding Clarifications on the Relevant Issues of Preferential Corporate Income Tax Policies in Fujian Pingtan Comprehensive Pilot Zone, which clarifies the substantial operation requirement for enjoying the preferential corporate income tax (CIT) in Fujian Pingtan Comprehensive Pilot Zone (hereinafter referred to as the Zone). The forgoing announcement shall be implemented from 1 January 2023.

An enterprise cannot enjoy the preferential CIT policy if it is registered in the Zone only. If the enterprise’s production and operation, personnel, finance, property etc. are not in the Zone, it will not be considered to have substantial operations in the Zone. The details are as follows:

1. Production and Operation in the Zone
   
   (1) The enterprise shall have a fixed production and operation promises and necessary production and operation equipment and facilities in the Zone, and the main production and operation promises is located in the Zone, or the organization that exercises substantial and comprehensive management and control over the production and operation is based in the Zone.
   (2) The enterprise shall conclude relevant contracts in the name of the enterprise.
   
   
2. Personnel in the Zone
   
   (1) The employees who meet the production and operation needs actually work in the Zone, and their wages and salaries are paid through the bank account opened by the enterprise in the Zone.
   (2) According to the size of the enterprise and the number of its employees, the enterprise shall have at least 3 to 30 employees who pay social insurance such as basic pension insurance for at least 6 months in the Zone in a tax year.
   
   
3. Finance in the Zone
   
   (1) The accounting documents, accounting books, financial statements and other accounting archives of the enterprise are kept in the Zone.
   (2) The enterprise's basic deposit account and bank account for main business settlement are opened in the Zone.
   
   
4. Property in the Zone
   
   The property that the enterprise has the ownership or right of use is actually used in the Zone or the organization that exercises substantial and comprehensive management and control over the property is based in the Zone, and the property shall match the production and operation of the enterprise.
   

If an enterprise registered in the Zone establishes branches outside the Zone, but it maintains substantial and comprehensive management and control over each branch’s production and operation, personnel, finance, properties, and so on, then it shall be considered to have a substantial operation in the Zone.

However, according to the official interpretation released by the Taxation Bureau, Finance Bureau, Economic Development Bureau and Market Regulatory Bureau of Fujian Pingtan Comprehensive Pilot Zone, any enterprise falling into either one of the following situations shall be considered disqualified for substantial operations:
(1) only undertakes financial settlements, tax filings, invoicing functions for business outside the Zone without production or operation functions; or
(2) the registered address is inconsistent with its actual business operation address and contact person of the enterprise cannot be reached or failed to provide its actual business address after accessed by the government authorities.

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