What Is an Accumulated Profits Tax?

Profits tax is also known as "war interest tax". Taxes levied by the National Government on the net profits of individuals, enterprises or groups exceeding 15% of capital. The "Extraordinary Excessive Profits Tax Regulations" promulgated on October 28, 1938 stipulates that for a profit-making enterprise with a capital of more than 2,000 yuan for a company, business name, bank, factory or individual, the profit amount exceeds 20% of the capital amount, If the property lease exceeds 15% of the property value, in addition to income tax, an excessive progressive tax rate (10-15%) at level 6 will be levied on excessive period profits tax. ^[1]

Profits tax

Profits tax is also known as "war interest tax". Taxes levied by the National Government on the net profits of individuals, enterprises or groups exceeding 15% of capital. The "Extraordinary Excessive Profits Tax Regulations" promulgated on October 28, 1938 stipulates that for a profit-making enterprise with a capital of more than 2,000 yuan for a company, business name, bank, factory or individual, the profit amount exceeds 20% of the capital amount, If the property lease exceeds 15% of the property value, in addition to income tax, an excessive progressive tax rate (10-15%) at level 6 will be levied on excessive period profits tax. ^[1]

Except where otherwise specified (such as Article 5 Property Tax, Article 8 Salary Tax or Article 88 Charity, etc.), the taxation of profits tax is not limited to companies, but also includes sole proprietorship, partnership, Any other legal person or social organization, etc., as long as any person's business activities comply with the provisions of Article 14 of the Inland Revenue Regulations, is profits tax.

Limited company profits tax rate is 16.5% (07.08 is 17.5%)

Sole proprietorship or partnership profits tax rate is 15% (16% in 2007-08)

In Hong Kong, the tax year of the profits tax can be freely chosen by the taxpayer and is generally the same as the taxpayer's fiscal year. For example:

1. April 1 of the Western calendar of each year to March 31 of the following year; or

2. January 1 of the Western calendar of each year to December 31 of the same year; or

3. The tenth day of the first lunar month of the lunar calendar and the ninth day of the first lunar month of the following year are all acceptable.

In Mainland China, the tax year is from January 1 to December 31 of the same year.

In Hong Kong, the concept of territory has always been a basic factor in taxing profits. In other words, only profits generated in or derived from Hong Kong are taxable here. However, although the principle of territorial concept itself is clear and clear, in the practical application of certain cases, it still causes controversy from time to time. It becomes a dispute between the tax bureau and practitioners and must be submitted to the Tax Appeal Board and the court for ruling. The Secret Service is in "

Tax deduction for personal expenses at company

This method of increasing expenditure is most commonly used by small and medium-sized companies in general, and it is also the lowest cost method. The company must prove that the expenditure is not a private household expenditure under Article 17 of the tax regulations. Therefore, employment contracts and director service contracts should be completed to prove that such expenses are expenses that the company must bear in order to earn tax revenue.

Salaries tax is lower than profits tax

As salaries tax is deductible and the first $ 97,500 after deducting the allowance is less than 15.5%, paying salaries tax is more advantageous than paying profits tax. However, the subsequent tax rate is 18.5%, which is higher than the profits tax, so it is more advantageous to pay the profits tax.

Limited company can set up "unlimited company" to reduce taxes

Because the tax rate of a limited company (16.5%) is 1% higher than the tax rate of a non-limited company (15.5%). As a result, profits tax can be calculated at a lower rate when transferring limited company profits to non-limited companies.

1. For the purchase of assets such as machinery and cultural equipment, the initial depreciation amount is 60% of capital expenditure

2. All expenses incurred in purchasing computer hardware and software can be deducted according to the facts

3. Capital expenditures paid by industrial and commercial enterprises for the renovation of commercial buildings can be deducted in equal amounts over five tax years.

4. If a Hong Kong company opens a "source processing plant" in China, it only needs to assess 50% of its profits as originating in Hong Kong and pay profits tax.