China has unveiled a master plan for building the Guangdong-Macao Intensive Cooperation Zone on Hengqin Island in Zhuhai. The master plan sets out a series of policies, many of which are similar to those implemented in the Hainan Free Trade Port (FTP). The policies include the establishment of a special system of customs surveillance as well as the deployment of financial and fiscal incentives for businesses and individuals.

On September 5, 2021, the Council of State published the Guangdong-Macao Intensive Cooperation Zone Construction Master Plan (hereinafter “masterplan”), in a process of diversifying Macao’s economy.

The cooperation area is located in Hengqin – the largest island in southern China Zhuhai town and close to Macau (separated by a river, Hengqin is only 200 meters from the closest point to Macau).

According to the master plan, the Guangdong-Macao Intensive Cooperation Zone (ZCI) will be managed under special customs supervision between “two lines”. Eligible businesses registered in the Zone will be entitled to a reduction Corporation tax (CIT) rate of 15 percent. Skilled talent and Macau residents working there will be subject to a drop personal income tax (IIT) passive.

The idea of ​​the Guangdong-Macao ZIC was launched at the time of the 20e anniversaries in December 2019, chaired by President Xi Jinping.

As one of China’s two Special Administrative Regions (SARs), Macau’s economy is considered smaller than Hong Kong’s and relies heavily on the gaming and entertainment industry. Macao SAR has a narrow area of ​​just over 30 square kilometers and a population of over 600,000.

Therefore, Beijing hopes that the neighboring island of Hengqin, which covers 106 square kilometers, or about three times the size of Macau, can foster new industries, contribute to Macau’s economic diversification, and provide a new home for Macau residents. to live and work.

Based on the plan, the area will focus on the development of certain industries, including high-end science and technology research and manufacturing, traditional Chinese medicine, culture and tourism, and modern finance.

Highlights of the ICZ Guangdong-Macao Master Plan

Innovative administrative system

Guangdong Province and Macao SAR will jointly form an administrative committee for the cooperation area. The administrative committee will operate under a “dual director” system, jointly headed by the governor of Guangdong and the chief executive of the Macao SAR.

An executive body will be set up within the administrative committee and the head will be appointed by the government of Macao SAR.

Special customs surveillance system

According to the master plan, for cross-border trade in goods, the Guangdong-Macao ZCI will establish “two lines” under different levels of customs control – the “first line” is drawn between Hengqin and Macao; and the “second line” is between Hengqin and mainland China.

Customs clearance procedures will be simplified for goods crossing the “first line”. With the exception of goods and articles clearly stipulated by the state as non-tax-exempt (non-bonded) articles, all other goods and articles may enter the CIZ from Macau tax-free (on bond). At the same time, goods crossing the “second line” will be subject to stricter customs control.

In addition, for (a) goods that are manufactured by companies in the zone without using imported materials and (b) goods that are processed in the CIZ and have achieved an added value of at least 30 percent of the value of origin, these goods may be exempt from import duties when imported into the mainland from the Zone.

Preferential tax policies for companies

Eligible businesses registered in the Guangdong-Macao ZCI will be entitled to a 15% corporate tax rate on business income tax, benefiting all industries that facilitate Macao’s economic diversification.

Capital expenditures of companies that meet the criteria will benefit from a one-time pre-tax deduction for the tax period in which the expenditure occurred or from accelerated depreciation.

Corporate income tax will be exempt on newly added income from foreign direct investment (FDI) in tourism, modern services and high-tech enterprises established in the cooperation area.

Preferential tax policies for individuals

The Cooperation Zone is also considering a policy similar to the Personal Income Tax (IIT) Incentives implemented in the nine cities of Guangdong in the Guangdong-Hong Kong-Macao Great Bay Region (GBA) as well as in the Hainan FTP.

High-end overseas and domestic talent and quickly sought-after talent working in the area may be exempt from paying the portion of income tax that exceeds 15 percent of their taxable income.

Additionally, for Macau residents working in CIZ, they may still be eligible for Macau IIT tariffs.

Other support measures

In addition to the above measures, the Guangdong-Macao CIZ will explore innovative cross-border monetary control, realize the free entry and exit of cross-border capital, and promote the convertibility of the capital account.

To boost the modern financial services industry, the master plan suggests establishing a financial services platform between China and Portuguese-speaking countries, developing cross-border RMB settlement, bond market, wealth management services and leasing. The Zone will lower the market access threshold for financial institutions invested in Macao in order to create banking and insurance institutions.

In high-end scientific and technological research and manufacturing sectors, the zone will mainly focus on the development of integrated circuits (ICs), big data, artificial intelligence (AI), Internet of things. (IoT) and biomedicine. High-level demonstration bases for industry, universities and research and a center for technological innovation and transformation must be built here. To support scientific and technological research, the Zone also plans to conduct tests to manage the security of cross-border data transmission and achieve cross-border connectivity of scientific research data.

To ease investment restrictions, it will formulate special measures to facilitate market access and adopt a “committed market access system”.

Hengqin Island, also known as Hengqin New Area, which has a population of around 53,000, has introduced several support measures in recent years that allow Macau businesses to operate on the island or beyond. borders. At the end of June, more than 4,300 Macau investment firms were registered on the island, up 20.5% from the end of 2020, with registered capital reaching 135.7 billion yuan ($ 21 billion). , according to the local market regulator.

Dezan Shira & Associates paid particular attention to the development of special economic zones in the Grande Baie region and to preferential policies in terms of trade facilitation, import and export rights, customs supervision and financial reforms. For more information, please contact us for help with

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