Free zones:
benefits without myths

01

“Free zone” in China is not a single legal regime

There are different instruments under the general name. Pilot Free Trade Zone tests liberalization of investment, finance and trade. Hainan Free Trade Port has a more comprehensive regime. Customs special supervision area or bonded zone primarily regulates the movement of goods. Development zone concentrates industry subsidies and infrastructure. A company can be in several geographically overlapping modes at the same time, but each benefit must be confirmed separately.

02

All 22 Pilot Free Trade Zones

The system covers coastal, central, western and border regions. Within each PFTZ there are separate areas and specializations, so the name of the province is only the first level of choice.

The list reflects 22 PFTZs confirmed by official data from the PRC government. A specific area of ​​the zone is additionally selected for the project.

03

How tax breaks actually work

The basic CIT rate in China remains 25%. The 15% rate appears only under a special national or regional rule. The preferential catalog, the share of core revenue, substantive operations, the period from the date of registration and the territorial reference of income are often checked. Other measures may include accelerated depreciation, foreign investment incentives, IITs for qualified professionals and local subsidies.

Tax address

Insufficient without real activity and fulfillment of program criteria

Industry

Must be exactly included in the current encouraged / preferential catalogue.

Revenue

In a number of regimes, at least 60% of total revenue must come from core activities

Substance

Management, personnel, accounting, assets and operations must be located in the required area

Period

The benefit is applied only within the specified period and is verified for the relevant tax year

04

Key centers with pronounced tax regimes

05

Customs benefits do not equal sales exemption

Bonded and customs special supervision regimes may defer or eliminate certain import payments while the goods are within the established border, processed or re-exported. When goods are released into the Chinese domestic market, there are usually associated customs and tax implications. Hainan has its own “zero tariffs” model for established categories and conditions.

Import into zone

Check the status of the goods, the purpose of import and the specific customs regime

Storage/processing

Bonded treatment is possible subject to control and accounting

Re-export

May not generate the same import charges as release into the domestic market

Sales in mainland

Requires separate calculation of duty, import VAT and possible consumption tax

Equipment

The benefit depends on the list, use and import bans

06

Separate Negative List for PFTZ

The PFTZ applies a special list of foreign investment restrictions. The current published version contains 27 items; outside the list, the principle of equal treatment of foreign and Chinese investments is applied, but industry licenses, the general Market Access Negative List, national security review and other regulatory requirements are retained.

07

Registration of a company within the zone

The basic corporate form and five-year capital rule remain China-wide. Differences arise in the address, competent registration authority, digital platform, preferential catalogue, licenses and subsequent confirmation of the program.

1. 01
   Selecting mode and area

   Not just a city, but a specific PFTZ, sub-zone, customs area or cooperation zone.

2. 02
   Tolerance check

   PFTZ Negative List, licenses and industry restrictions.

3. 03
   Tax benefit test

   Catalog, revenue, substance, term and territorial connection of income.

4. 04
   Corporate registration

   Name, address, business scope, capital, participants and governing bodies.

5. 05
   Post-registration

   Stamps, taxes, bank, SAFE, customs, personnel and licenses.

6. 06
   Benefit application/confirmation

   Collect industry and substance documents according to the rules of a specific program.

08

Substance is fact-checked

The benefited company must demonstrate that activities are actually carried out in the zone. The wording varies across regimes, but tax authorities typically look at the place of management and control, personnel, accounting, assets, contracts, banking transactions and the origin of revenue.

Management

Decisions and daily control are carried out from the declared area

Staff

The real team and functions correspond to the preferential activities

Accounting

Books, taxes and source documents reflect zone transactions

Assets and premises

Sufficient for the declared function and not a nominal address

Revenue

Income from the activities of the preferential catalog is separately confirmed

09

We choose not the lowest bid, but a working ecosystem

The zone must suit customers, employees, logistics, license, data and the bank. Tax savings are compared with the costs of the substance and the restrictions on the use of the benefit.

10

Data for comparison of zones and benefits

1. 01

   Exact product, business scope, customers, suppliers and regulated functions.

2. 02

   Revenue forecast for each type of activity and the share of core income.

3. 03

   Team, office, equipment, IP, management and accounting function.

4. 04

   Import, export, goods routes, customs codes and sales in the mainland.

5. 05

   Banking currencies, cross-border payments and the need for foreign exchange.

6. 06

   Comparison of CIT, other benefits, subsidies and the full cost of the substance.