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  • Working out the tainted income ratio



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    The tainted income ratio is worked out by dividing the gross tainted turnover of a CFC by the gross turnover of the CFC.

    The following is a simple example of how to work out the tainted income ratio.

    Example 14
    Working out the active income test ratio


    shown in accounts

    Interest - passive



    Royalty - passive



    Business income - from goods manufactured in Hong Kong



    Manufacturing expenses



    Tainted income ratio

    = Gross tainted turnover gross turnover


    = 3m/63m


    = 4.8%


    Therefore, the CFC passes the test.

    Is the tainted income ratio is less than 5 per cent%?


    The CFC has passed the active income test. Read on.


    The CFC has failed the active income test. Go to part 3.

    Last modified: 05 Dec 2006QC 17522