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  • Working out the tainted income ratio


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    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

    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%?


    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 18000