Moon Ltd’s accounting profit before tax for the year 2017 is RMB620,000 and its turnover is RMB12,300,000. Except where stated otherwise, the following items have been included when computing the accounting profit before tax:
(1) Entertainment expenses of RMB120,000 incurred in 2017.
(2) Marketing and promotion expenses of RMB1,000,000 incurred in 2017. Excess marketing expenses brought forward from 2016, and not deducted in arriving at the accounting profit for the year 2017, are RMB350,000.
(3) Research and development (R&D) expenses of RMB160,000. Moon Ltd qualified as a small-medium sized technology enterprise and can enjoy the additional tax incentive on R&D expenses.
(4) Handicapped employees’ salaries of RMB200,000.
(5) Qualified work safety equipment at a cost of RMB150,000.
(6) A fine of RMB17,800 issued by the trademark bureau for infringement of a trademark.
(7) Staff welfare expenses of RMB461,000. Total salaries incurred were RMB4,000,000.
(8) The cost of lost inventory of RMB450,000, due to the warehouse being destroyed in a fire during the year, and insurance compensation received of RMB430,000.
(9) A special provision for doubtful debts of RMB121,000.
(10) A bad debt written off of RMB32,000 as the debtor declared bankruptcy.
(11) A specific purpose government subsidy received of RMB350,000 and related costs incurred of RMB310,000.
(12) A general purpose government subsidy received of RMB428,000.
(13) An amount owed by Moon Ltd of RMB4,000 written off to income as the creditor ceased trading.
(14) Interest income on treasury bonds of RMB8,000.
(15) Bank interest income of RMB16,500.
(16) A value added tax (VAT) refund on export of goods for RMB768,000.
(17) Dividend income from a Vietnam subsidiary of RMB90,000 (gross dividend of RMB100,000, Vietnam tax paid RMB10,000).
(18) Dividend income from a China subsidiary of RMB30,000 (profit before tax of the China subsidiary was RMB40,000 and enterprise income tax (EIT) paid of RMB10,000).
(19) Profit on the sale of A-shares of RMB60,500.
(20) A donation paid to the China Red Cross for RMB100,000.
Required:
Calculate the enterprise income tax (EIT) payable by Moon Ltd for the year 2017, assuming that Moon Ltd has made all relevant applications and reports to the tax authorities.
Notes:
1. You should start your computation with the profit before tax figure of RMB620,000 and list all of the items (1) to (20) as referred to in the question, identifying any item which does not require adjustment for tax purposes by the use of zero (0).
2. You are not required to make adjustments for any of the above items for accounting purposes.
