The RMB 5 Million Line That Changes When You Buy Equipment
Hainan lets an entity deduct qualifying assets in full in the year of purchase below a unit value of RMB 5 million, and accelerate above it. The relief runs to the end of 2027, which makes it a sequencing question.
HainanInc Tax Advisory
· 4 min read
Most conversations about Hainan's tax regime stop at the headline rate. The reduced corporate income tax rate is the reason groups look at the island, and it absorbs the whole discussion. Sitting in the same notice, largely unremarked, is a capital expenditure relief that for an equipment-heavy or software-heavy business can be worth more in the years it applies than the rate reduction itself — and unlike the rate, it rewards decisions about timing.
Two treatments, divided by unit value
Under the Notice on Enterprise Income Tax Preferential Policies for the Hainan Free Trade Port (财税〔2020〕31号), an enterprise established in the Free Trade Port that newly acquires — including by construction or self-development — a fixed asset or intangible asset with a unit value of no more than RMB 5 million may include the cost in current-period costs and expenses in full, deducting it when computing taxable income rather than depreciating or amortising it over years. Above RMB 5 million per unit, the enterprise may shorten the depreciation or amortisation period, or adopt an accelerated method. Fixed assets for this purpose means fixed assets other than buildings and structures.
The implementing detail extends the treatment to audit-assessed second-tier branches established in the Free Trade Port and to the establishments and places of non-resident enterprises. Intangible assets are deducted in full, or begin accelerated amortisation, in the year they become available for use; for self-developed intangibles, the acquisition point is taken as when the asset reaches its intended condition for use.
Where the RMB 5 million threshold is set
- Notice on Enterprise Income Tax Preferential Policies for the Hainan Free Trade Port (财税〔2020〕31号) — Ministry of Finance and State Taxation Administration, 23 June 2020 — source of the RMB 5 million unit-value threshold, the full current-period deduction below it, and shortened or accelerated depreciation and amortisation above it; fixed assets here exclude buildings and structures.
- Notice on Continuing the Hainan Free Trade Port Enterprise Income Tax Preferential Policies (财税〔2025〕3号) — Ministry of Finance and State Taxation Administration, 12 February 2025 — extends the package to 31 December 2027.
- The implementing announcement for the capital expenditure treatment runs from 1 January 2025 to 31 December 2027 and extends to audit-assessed second-tier branches and to establishments and places of non-resident enterprises.
- All positions above verified against the issuing bodies' published texts in September 2026.
This is a timing benefit, and the timing has an end date
Full deduction in the year of purchase does not create a permanent saving. It moves the deduction forward, which is worth the time value of the tax deferred and — more importantly for a young entity — improves cash in the years when cash is scarcest. That is a real benefit, and it is bounded: the treatment runs to 31 December 2027 alongside the rest of the package, with nothing published about what follows. Expenditure incurred inside the window is treated one way and expenditure after it may not be.
For a business with a genuine multi-year equipment or development programme, that turns an accounting detail into a scheduling question with a deadline. The question is not whether to buy the asset. It is whether the purchase falls inside a window that will not obviously be there afterwards.
The rate reduction rewards where you are. The capital expenditure relief rewards when you buy.
Where it interacts with the rest of the position
The relief does not sit apart from the conditions on the rest of the regime. It also interacts with the substance position in a way that happens to be helpful: acquiring the equipment and facilities the business actually needs, held in the Free Trade Port, supports the production and operation element of substantive operation, which requires fixed premises and the necessary equipment. A capital programme structured for the relief tends to strengthen the substance file rather than compete with it, which is an unusually clean alignment and worth exploiting deliberately.
What to establish before relying on it
- Unit value tested per asset against the RMB 5 million line, since the treatment differs on either side of it.
- Whether the asset is a fixed asset within the definition used here, which excludes buildings and structures.
- For intangibles, the year the asset becomes available for use, or reaches its intended condition for use where self-developed.
- Whether the acquiring entity is one the treatment reaches, including second-tier branches and non-resident establishments where relevant.
- The programme's schedule mapped against 31 December 2027, with the post-window assumption stated explicitly.
How the advisory work runs
Accounting and tax consultancy work here is the modelling and the sequencing: what the election is worth for this asset programme, how it interacts with the rate and the substance position, and what the schedule should look like given a window that closes at the end of 2027. Where the analysis affects filed positions, the filings themselves are carried by a licensed firm — HainanInc does not hold bookkeeping or tax-service registration — and we review the output and hold the calendar. The analysis, though, is where the decision is actually made.
This is general commentary on published policy, not entity-specific tax advice, and the treatment of a particular asset depends on facts this note does not address. Figures cited are drawn from the instruments listed above and were verified in September 2026. Confirm currency before relying on any figure.