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These notes are issued for the information of taxpayers and their tax - page 58 / 68

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134. residents:

Tax credit in respect of profits attributed to the permanent establishment in the Mainland

=

Profits attributed to the permanent establishment in the Mainland

x

Tax payable Assessable profits

= $10,000

x

175,000 1,000,000

= $1,750

Actual tax credit allowed is to be restricted to the actual tax paid in the Mainland, i.e. $1,500

The computation of tax credit for royalties received by Hong Kong

Example 8

Hong Kong resident Company D prepares its accounts annually for

the

year

ending

2007,

Company

31

D

December.

For

receives

royalties

the

year

ended

of

$90,000

from

31

December

the

Mainland

and

the

tax

withheld

in

the

Mainland

is

$6,300

(i.e.

$90,000

x

7%).

Such royalties are income arising expenses allowable for deduction

in Hong Kong. The under the Ordinance

amount of (excluding

the tax withheld) is $70,000.

Company D does not have any other

income or expenses during the relevant year.

- Tax paid in the Mainland

$6,300 )

or

)

$

Assessable income for the year of assessment 2007/08 $(90,000 – 70,000)

20,000

Tax payable before allowance of tax credit (the tax rate for the year 2007/08 is 17.5%) Less: Tax credit

3,500

54

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