Authorities in southern China’s Hainan province have drastically lowered the local income tax rate for the province’s top earners in a bid to lure top talents.

The government of the island province introduced the new policy at a press conference Thursday, setting the top-tier income tax rate at 15%, far lower than elsewhere on the Chinese mainland.

The reduced tax rate applies to people who earn an annual income of 300,000 yuan ($43,700) or more and have signed at least a one-year labor contract with a company registered in Hainan’s free-trade port. The policy will remain in effect through 2024.

“Hainan is relatively lacking in talent, especially compared with China’s advanced regions,” Sun Dahai, director of the free-trade port’s work committee office, said at the press conference. “We believe the preferential personal income tax policies, in combination with preferential corporate income tax policies and others, will definitely attract more high-end and in-demand talents, both domestic and foreign, to Hainan.”

The highest personal income tax rate on the Chinese mainland is 45%, while the highest rates in Hong Kong and Singapore are reportedly 17% and 22%, respectively.

Hainan is seeking top talents with expertise in a number of sectors including tourism, logistics, education, and telecommunications, according to the policy document.

In April 2018, Hainan received approval to establish its own pilot free-trade zone (FTZ). This June, the central government and the State Council, China’s Cabinet, issued an “Overall Plan for the Construction of Hainan’s Free-Trade Port” that outlined measures for promoting facilitated trade, investment, and cross-border capital flow.

China’s first free-trade zone was inaugurated in Shanghai in 2013 and ultimately expanded last year. Eleven more FTZs were introduced in provinces such as Guangdong, Fujian, and Sichuan. In August 2019, the State Council issued a plan to establish six new pilot FTZs in the provincial-level regions of Shandong, Jiangsu, Guangxi, Hebei, Yunnan, and Heilongjiang, bringing the total number of FTZs in China to 18.

Editor: David Paulk.

(Header image: A man stands by a poster during a job fair in Haikou, Hainan province, May 20, 2020. People Visual)