U7_Profits_1 1THE UNIVERSITY OF HONG KONG SCHOOL OF BUSINESS BUSI 0018 – Hong Kong TaxationUnit 7 – Profits Tax (1) Coverage 1Basic charge of profits tax 2Definition of trade 3Badges of trade 4Definition of profession 5Definition of business 6Carrying on trade, profession or business in HK 7Source of profits 8DIPN No. 21: Locality of profits 9Deemed trading receipts 10Income excluded from scope of charge Learning Objectives After completing this unit, you should be able to: •describe the scope of charge to profits tax •identify chargeable person for the purposes of profits tax •define trade, business and profession •determine whether the activities involved are considered to be a trade carrying on in Hong Kong •apply source principles to profits in different business environments •determine whether profits are attributable to a Hong Kong source•determine what receipts are deemed to be taxable trading receipts •identify income specifically excluded from the charge to profits tax 1 BASIC CHARGE OF PROFITS TAX – SECTION 14 (1) •s.14(1) of the IRO: “Subject to the provisions of this Ordinance, profits tax shall be charged for each year of assessment at the standard rate on every person carrying on a trade, profession or business in Hong Kong in respect of his assessable profitsarising in or derived from Hong Kong for that year from such trade, profession or business (excluding profits arising from the sale of capital assets) as ascertained in accordance with this Part.” 1.1 3 Conditions under s.14(1) (1) the person must carrying on a trade, profession or business in Hong Kong; (1stof 2-Limb Test)(2) the profits to be charged must be from such trade, profession or business carried on by the person in Hong Kong; and (3) the profits must be arising in or derived from Hong Kong (i.e. sourced in Hong Kong) (2ndof 2-Limb Test)
has intentionally blurred sections.
Sign up to view the full version.