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These notes are issued for the information of taxpayers and their tax - page 57 / 68

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Less: tax credit allowed

(3,836)

Hong Kong tax payable

1,702

The first

$30,000

x

2%

The second

$30,000

x

7%

The remaining

$21,836

x

13%

Amount not allowed as a tax credit $10,000 – $3,836 = $6,164

(Note 1)

Under section 50(5), tax paid in the Mainland which is not allowed as a tax credit can be deducted from the income

Tax payable on:

$81,836

600 2,100 2,838 5,538

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

$120,000 – $6,164 = $113,836

133.

The computation of tax credits where profits are attributed to a

permanent establishment situated in the Mainland:

Hong Kong Resident Company

$

Total business receipts

15,000,000

(from the Mainland and Hong Kong)

Assessable profit

1,000,000

Example 7

175,000

Profits tax rate (company) 17.5% Tax payable $1,000,000 x 17.5%

=

Mainland Contract Sales of machinery and equipment including installation (which takes more than 6 months to complete) to the Special Economic Zone of the Mainland (Tax rate : 15%)

$10,000

=

$10,000 x 15%

=

$1,500

Total price

Enterprise income tax in the Mainland

$2,000,000

53

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