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These notes are issued for the information of taxpayers and their tax - page 54 / 68

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(Note 1)

Tax payable Hong Kong : $1,500 x 16% The Mainland : $500 x 33%

240

165

Total tax liabilities of the two Sides before allowance of tax credit $240 + $165 = $405

Less : Tax credit - Tax paid in the Mainland or - The tax credit limit $500 x 16% (whichever is smaller) Total tax liabilities of the two (Note 1) =

(80)

(Note 2)

160

+

$165 ) ) ) $80 )

$325

165

Sides after allowance of tax credit

In accordance with section 50(5), the amount of tax paid in the Mainland not allowed as a tax credit, i.e. $102 ($165 – $63), can be allowed as a deduction as shown in the detailed computation below:

Mainland tax paid

$$ 165

Net income from the Mainland after tax (grossed up at effective Hong Kong tax rate)

100% $335 x 100% – 16%

398

Less: Net Income from the Mainland after tax $(500 – 165)

(335)

Less: Tax credit limit for tax paid in the Mainland Tax paid in the Mainland not allowed as a tax credit

(63) 102

Hong Kong tax payable before tax credit

$[1,000 + (500 – 102)] x 16% =$(1,000 + 398) x 16% Less: Tax credit limit for tax paid in the Mainland Hong Kong tax payable after allowance of tax credit

223 (63) 160

50

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