The Tax Bureau of Nansha District, Guangzhou and other three authorities have jointly released the Announcement on Issues concerning Substantive Operation of Enterprises in Encouraged Industries in Nansha of Guangzhou, with effective from January 1, 2022 to December 31, 2026.
It is clarified in the MOF and STA No.40 (2022) document that enterprises should meet two conditions to be eligible for the reduced corporate income tax ("CIT") rate of 15 percent in Nansha, including conducting "substantive operation". Compared with the Exposure Draft, the Announcement has improved the statement of the requirements for "substantive operation" relating to production and operation, personnel, accounts, and properties. It is stated that those resident enterprises that are just registered in Nansha district and do not have their production and operation, personnel, accounting or property in the district would not be considered meeting the criteria for substantive operation, and would not be eligible for the preferential CIT policies.