• ##### Working out the tainted income ratio

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This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

End of attention

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

Calculation element

\$HK
shown in accounts

Interest - passive

2 million

Royalty - passive

1 million

Business income - from goods manufactured in Hong Kong

60 million

Manufacturing expenses

40 million

Tainted income ratio = gross tainted turnover ÷ gross turnover

= 3 million ÷ 63 million

= 4.8% of gross turnover

Therefore, the CFC passes the test.

End of example

Is the tainted income ratio is less than 5%?

 Yes The CFC has passed the active income test. Read on. No The CFC has failed the active income test. Go to part 3.