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These notes are issued for the information of taxpayers and their tax - page 55 / 68

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(Note 2)

The formula of the credit limit is based on sections 50(3) and 50(5) of the Ordinance. If the tax payable by a taxpayer is computed at flat rate, the following simplified formula can be used to compute the credit limit:

Tax credit limit for tax paid in the = Mainland

Taxable income from the Mainland

x

Tax payable in Hong Kong Total assessable income

Taxable income in the Mainland Tax payable in Hong Kong before allowance of tax credit Total assessable income

$ 500 240

1,500

Tax credit limit for tax paid in the Mainland

= $500 x

240 1,500

= $80

132.

In the case of an individual taxpayer whose tax is computed at

progressive tax rates, the tax credit is computed as follows:

Example 6

$

Total Hong Kong assessable income

200,000

Including gross income from the Mainland before tax

120,000

Tax paid in the Mainland

10,000

Tax rate in the Mainland

8.33%

Net income after tax from the Mainland

110,000

The effective tax rate in Hong Kong and the tax credit are computed as follows: $ 200,000 (12,000) 188,000 (100,000) 88,000 Total Hong Kong assessable income Less: Deductible items Net assessable income Less: Personal allowance Net chargeable income

51

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