Ans 9. Profits 3

Ans 9. Profits 3 - BUSI 0018 Hong Kong Taxation Tutorial...

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TA_U9_Profits_3 1 BUSI 0018 – Hong Kong Taxation Tutorial Questions Unit 9 – Profits Tax (3) Answer 21 Mr. Lee’s Business Computation of Hong Kong Profits Tax Year of Assessment 2009/10 Basis Period: Year ended 31 December 2009 $ $ Net Profit per account 1,154,000 Less: Non-taxable income Interest from deposits in Singapore 40,000 Interest from local deposits 16,000 Debentures interest 8,000 Offshore commission 55,000 Profit on disposal of fixed assets 15,000 Dividends 10,000 144,000 1,010,000 Add: Non-deductible expenses Travelling expenses of offshore commission 10,000 Solicitor fees and stamp duty for assignment of new office 45,000 Solicitor fees for recovery of staff loan 3,000 Interest paid to Mr. Lee 25,000 Decoration of new office 150,000 Salaries to proprietor 162,000 Customer loans written off 10,000 Staff loans written off 5,000 Increase in general provision for bad debt 10,000 Depreciation 85,000 Donations 6,000 Traffic fines 2,000 513,000 1,523,000 Less: Depreciation allowance 92,000 1,431,000 Less: Approved charitable donations 1,000 Assessable Profit 1,430,000 Profits tax thereon @15% 214,500
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TA_U9_Profits_3 2 Notes: 1. Interest received from US dollar deposits placed in Singapore is offshore in nature under provision of credit test and therefore not taxable. Interest received from Euro$ deposit with a local bank is sourced in HK as the provision of credit was in Hong Kong. However, with effect from 22 June 1998, interest earned from authorised institution in HK will be exempt from profits tax by virtue of the Exemption Order. However, the Exemption Order will not be applicable if the deposit has been used to secure any bank borrowing where the condition under S.16(2)(c), (d) or (e) is satisfied and the limitations under S.16(2A) and (2B) do not apply. Since the HK$ deposits placed with the local bank were used to secure for bank borrowings and
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This note was uploaded on 02/23/2012 for the course BUSI 0018 taught by Professor during the Spring '11 term at HKU.

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Ans 9. Profits 3 - BUSI 0018 Hong Kong Taxation Tutorial...

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