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  • Working out the tainted income ratio



    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



    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.

    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