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Does the Inland Revenue Department allow apportioned (overseas) profits to be taxed?

The current tax law does not provide for the apportionment of profits derived from overseas. In fact, if the Inland Revenue Department considers that taxpayers’ profits cannot be fully exempted from profits tax, it will also consider the feasibility of apportioning taxable profits.

For example, in the service industry, if taxpayers provide some services overseas, the overseas profits will be deducted from the total profits for taxation. Another example is that under the type of processing trade with imported materials in the manufacturing industry, the Inland Revenue Department will levy profits tax at 50% of the profits from the sale of finished products. However, according to the Interpretation and Implementation Guidelines No. 21 of the Tax Regulations, there is no need to share profits in trade profits.

When the Inland Revenue Department determines the portion of profits derived from overseas, taxpayers need to reduce the indirect expenditures incurred from various parts of Hong Kong and overseas, and explain clearly to the Inland Revenue Department the criteria for reducing expenditures. Generally, taxpayers should use the gross profit amount. Share expenses.

The above information is for reference only. If in doubt, we welcome your tax inquiries

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