TA_U9_Profits_3 1BUSI 0018 – Hong Kong Taxation Tutorial Questions Unit 9 – Profits Tax (3) Answer 21Mr. Lee’s Business Computation of Hong Kong Profits Tax Year of Assessment 2007/08 Basis Period: Year ended 31 December 2007 $ $ Net Profit per account 1,154,000 Less: Non-taxable income Interest from deposits in Singapore 40,000Interest from local deposits 16,000Debentures interest 8,000Offshore commission 55,000Profit on disposal of fixed assets 15,000Dividends 10,000144,0001,010,000 Add: Non-deductible expenses Travelling expenses of offshore commission 10,000Solicitor fees and stamp duty for assignment of new office 45,000Solicitor fees for recovery of staff loan 3,000Interest paid to Mr. Lee 25,000Decoration of new office 150,000Salaries to proprietor 162,000Customer loans written off 10,000Staff loans written off 5,000Increase in general provision for bad debt 10,000Depreciation 85,000Donations 6,000Traffic fines 2,000513,0001,523,000 Less: Depreciation allowance 92,0001,431,000 Less: Approved charitable donations 1,000Assessable Profit 1,430,000Profits tax thereon @16% 228,800** Profits tax for 2007/08 is reduced by 75% or $25,000, whichever is the less. Therefore, the profits tax liability is $228,800 - $25,000 = $203,800
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