Illustrative examples of the application and computation of two-tiered profits tax rates

A:

Corporation A declares assessable profits of $1,500,000 for the year of assessment 2018/19. Since Corporation A has no connected entity, its Profits Tax should be calculated as follows:

Before implementation of the two-tiered profits tax rates regime

After implementation of the two-tiered profits tax rates regime

A:

Corporation B declares assessable profits of $2,500,000 for the year of assessment 2018/19. Since Corporation B has no connected entity, its Profits Tax should be calculated as follows:

Before implementation of the two-tiered profits tax rates regime

After implementation of the two-tiered profits tax rates regime

A:

Corporation C declares assessable profits of $1,500,000 for the year of assessment 2018/19. Since assessable profits of a connected entity are charged at the two-tiered rates, the Profits Tax of Corporation C should be charged at 16.5% as follows:

Before implementation of the two-tiered profits tax rates regime

After implementation of the two-tiered profits tax rates regime

A:

Partnership D declares assessable profits of $1,500,000 for the year of assessment 2018/19. Since Partnership D has no connected entity and all its partners are individuals, its Profits Tax should be calculated as follows:

Before implementation of the two-tiered profits tax rates regime

After implementation of the two-tiered profits tax rates regime

A:

Partnership E declares assessable profits of $2,500,000 for the year of assessment 2018/19. Since Partnership E has no connected entity and all its partners are individuals, its Profits Tax should be calculated as follows:

Before implementation of the two-tiered profits tax rates regime

After implementation of the two-tiered profits tax rates regime

A:

Partnership F declares assessable profits of $1,500,000 for the year of assessment 2018/19. Since assessable profits of a connected entity are charged at two-tiered rates and all its partners are individuals, the Profits Tax of Partnership F should be charged at 15% as follows:

Before implementation of the two-tiered profits tax rates regime

After implementation of the two-tiered profits tax rates regime

A:

Partnership G declares assessable profits of $5,000,000 for the year of assessment 2018/19. Partnership G has one corporate partner and two individual partners sharing 20% and 80% of the profits or loss respectively. Since Partnership G has no connected entity, its Profits Tax should be calculated as follows:

Before implementation of the two-tiered profits tax rates regime

After implementation of the two-tiered profits tax rates regime

A:

Partnership H declares assessable profits of $3,500,000 for the year of assessment 2018/19 with losses of $700,000 brought forward. It has five individual partners sharing profits or losses equally and one individual partner elects for Personal Assessment. Since Partnership H has no connected entity, its Profits Tax should be calculated as follows:

Before implementation of the two-tiered profits tax rates regime

After implementation of the two-tiered profits tax rates regime

A:

Corporation J, a qualifying corporate treasury centre, declares assessable profits of $4,000,000 for the year of assessment 2018/19 and makes an election to have its qualifying profits of $1,000,000 charged at half rate. Since Corporation J has elected to have its qualifying profits assessed at half rate, its Profits Tax should be calculated as follows:

Before implementation of the two-tiered profits tax rates regime

After implementation of the two-tiered profits tax rates regime

A:

Corporation K declares assessable profits of $4,000,000 for the year of assessment 2018/19, including assessable profits of $1,000,000 derived from qualifying debt instruments. Since Corporation K has no connected entity, its Profits Tax should be calculated as follows:

Before implementation of the two-tiered profits tax rates regime

After implementation of the two-tiered profits tax rates regime

A:

Sole proprietorship business A ("A Co.") declares assessable profits of $2,500,000 for the year of assessment 2018/19. Since A Co. has no connected entity, its Profits Tax should be calculated as follows:

Before implementation of the two-tiered profits tax rates regime

After implementation of the two-tiered profits tax rates regime

A:

Mr. Chan is married. He receives salaries income of $332,000 from his employment and the assessable profits of his wife, Mrs. Chan's sole-proprietorship business (B Co.) are assessed as $200,000 for the year of assessment 2018/19. The couple elects for Personal Assessment and has not paid any provisional tax for the year of assessment 2018/19.

Mrs. Chan declares in her 2018/19 Tax Return – Individuals that B Co. is chargeable at two-tiered profits tax rates as no other connected entity has elected two-tiered profits tax rates for the year of assessment 2018/19.

Comparison of tax payable for the year of assessment 2018/19 before and after implementation of the two-tiered profits tax rates regime (with election for Personal Assessment)

A:

Mr. Leung, single, receives salaries income of $150,000 from an employment and the assessable profits of Mr. Leung's two sole-proprietorship businesses (C Co. and D Co.) are assessed at $380,000 and $30,000 respectively for the year of assessment 2018/19. Mr. Leung elects for Personal Assessment and has not paid any provisional tax for the year of assessment 2018/19.

Mr. Leung declares in his 2018/19 Tax Return – Individuals that C Co.is chargeable at two-tiered profits tax rates as no other connected entity has elected two-tiered profits tax rates for the year of assessment 2018/19.

Comparison of tax payable for the year of assessment 2018/19 before and after implementation of the two-tiered profits tax rates regime (with election for Personal Assessment)

A:

Mr. Ho is a married person with 2 children. Mr. Ho and Mrs. Ho report their incomes and expenses in their 2018/19 tax returns as follows:

The couple elects for personal assessment and has not paid any provisional tax for the year of assessment 2018/19.

Mr. Ho declares in his Tax Return – Individuals that G Co. is chargeable at two-tiered profits tax rates as no other connected entity has elected two-tiered profits tax rates for the year of assessment 2018/19.

Comparison of tax payable for the year of assessment 2018/19 before and after implementation of the two-tiered profits tax rates regime (with election for Personal Assessment)