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Key Facts: TIHK CTA Paper 2 Exam

HK$1,600

Exam Fee per Paper

TIHK 2026

3 Hours

Exam Duration

TIHK

50%

Passing Mark

TIHK

5 Years

Paper Pass Validity

TIHK

October

Annual Exam Month

TIHK Schedule

TIHK CTA Paper 2 (Hong Kong Tax) is a 3-hour closed-book written examination testing advanced Hong Kong tax law and practical tax computations. The exam fee is HK$1,600 per paper. While the official exam consists of essay and complex scenario questions, this free English MCQ practice bank serves as a focused knowledge and computation study aid for candidates preparing for the October qualifying examination.

Sample TIHK CTA Paper 2 Practice Questions

Try these sample questions to review concepts for the TIHK CTA Paper 2 exam. Each question includes a detailed explanation. Start the interactive quiz above for the full 21+ question experience with AI tutoring.

1Under Section 14 of the Inland Revenue Ordinance (IRO), which condition MUST be satisfied for a person to be subject to Hong Kong Profits Tax?

A.Must be a HK resident company

B.Must carry on a trade, profession, or business in HK, with profits arising in or derived from HK from that trade/profession/business

C.Must have a physical office in HK with 5 employees

D.Worldwide profits must exceed HK$2,000,000

Explanation: Section 14(1) requires carrying on a trade, profession or business in HK and deriving HK-sourced profits therefrom. HK adopts the territorial basis of taxation regardless of residence.

2A HK trading company negotiates and concludes purchase and sales contracts in HK for goods shipped directly from Taiwan to Japan. Where are the trading profits derived?

A.Taiwan

B.Japan

C.Hong Kong

D.Offshore (exempt)

Explanation: Under CIR v Hang Seng Bank and TVB International, the source of trading profits is determined by where contracts of purchase and sale are negotiated and concluded (Hong Kong).

3Company A reports assessable profits of HK$3,500,000 for 2025/26. It claims two-tiered Profits Tax rates. What is its total Profits Tax liability?

A.HK$577,500

B.HK$412,500

C.HK$288,750

D.HK$511,500

Explanation: First HK$2,000,000 × 8.25% = HK$165,000. Remaining HK$1,500,000 × 16.5% = HK$247,500. Total = HK$412,500.

4Which of the following expenses is specifically NON-DEDUCTIBLE under Section 17 of the IRO?

A.Trade association subscriptions

B.Domestic or private expenses, and capital expenditure or loss of capital

C.Bad debts previously included as assessable profits

D.Mandatory MPF contributions for employees

Explanation: Section 17(1)(a) specifically prohibits domestic or private expenses, and Section 17(1)(c) disallows capital expenditure or loss of capital.

5Under Section 16(1)(a) and Section 16(2), what is required for interest expense to be deductible by a HK business?

A.Must be paid to a tax-exempt charity

B.Borrowed for producing assessable profits and satisfy at least one Section 16(2) condition (e.g., lender chargeable to HK Profits Tax)

C.Loan secured by offshore real property

D.Interest rate at least 2% above HIBOR

Explanation: Interest must be incurred for producing assessable profits (Sec 16(1)(a)) and satisfy one condition in Sec 16(2) (such as lender subject to HK tax under Sec 16(2)(c)).

6Company P earns assessable profits of HK$1,300,000 in Hong Kong. Assuming standard corporate Profits Tax rate of 16.5% (without two-tiered rates), what is the Profits Tax payable?

A.HK$214,500

B.HK$107,250

C.HK$171,600

D.HK$257,400

Explanation: Profits Tax is calculated at 16.5% on HK$1,300,000 assessable profits = HK$214,500.

7Which of the following is correct regarding the tax treatment of dividends received by a Hong Kong company from another HK company?

A.Exempt from Profits Tax under Section 26(a) of the IRO

B.Subject to 16.5% withholding tax

C.Included as assessable trading income

D.Taxed at 8.25% flat rate

Explanation: Under Section 26(a) of the IRO, dividends received from a corporation which is chargeable to Profits Tax are excluded from assessable profits to prevent double taxation.

8What is the statutory deadline for lodging a holdover application for Provisional Salaries Tax under Section 63E of the IRO?

A.28 days before the due date for payment of provisional tax (or 14 days after notice of assessment, whichever is later)

B.1 month after the end of the tax year

C.60 days after receiving the assessment

D.No deadline exists

Explanation: Under Section 63E(1), an application to hold over provisional Salaries Tax must be lodged in writing not later than 28 days before the due date for payment, or 14 days after the date of notice of assessment, whichever is later.

9Under Section 19C of the IRO, how are unabsorbed trading losses carried forward by a corporation for Profits Tax purposes?

A.Carried forward indefinitely to set off against future assessable profits of the corporation

B.Carried forward for a maximum of 5 years only

C.Carried back 3 years against past profits

D.Surrendered to parent company under group relief

Explanation: Under Section 19C(4), corporate trading losses incurred in a trade or business in HK can be carried forward indefinitely without time limit to offset future assessable profits of that corporation. Hong Kong does not have group loss relief or loss carry-back.

10Under Section 16G of the IRO, how is capital expenditure on prescribed manufacturing plant and computer hardware/software treated for Profits Tax?

A.Written off immediately (100% deduction) in the year of assessment in which it is incurred

B.Deducted over 5 years

C.Deducted at 20% annual allowance

D.Non-deductible capital expenditure

Explanation: Section 16G allows an immediate 100% full deduction for capital expenditure incurred on prescribed manufacturing plant and machinery, computer hardware, and software.

About the TIHK CTA Paper 2 Exam

Official qualifying examination paper for the Chartered Tax Adviser (CTA) designation in Hong Kong. Covers Inland Revenue Ordinance provisions, Profits Tax, Salaries Tax, Property Tax, Stamp Duty, and anti-avoidance.

Exam sponsor: The Taxation Institute of Hong Kong (TIHK). The requirements and fees below concern the certification or admission exam, separate from our free practice resources.

Assessment

Performance-based assessment

Time Limit

3 hours

Passing Score

50%

Exam / Certification Fees

HK$1,600

Exam sponsor website

Reported exam pass rate: 45%. estimated candidate pass rate across sittings This describes exam candidates, not OpenExamPrep users or results from using our resources. Exam sponsor website

Fees, eligibility, and exam policies can change. Confirm them with the exam sponsor before applying or paying.

Official sources

Our practice resources: topics covered

We aim to reflect publicly available exam outlines and topic information in our study resources. Coverage, format, and difficulty may differ from the actual exam, and we cannot guarantee that every detail is accurate or current. Confirm exam requirements, fees, and policies with the official exam sponsor.

35%

Profits Tax

Scope of charge, source principle, deductible expenses under Sec 16, non-deductible items Sec 17, two-tiered rates

25%

Salaries Tax & Personal Assessment

Locality of employment, assessable income, share options, statutory deductions, Personal Assessment election

15%

Property Tax & Stamp Duty

Property Tax net assessable value, Ad Valorem Stamp Duty, SSD, BSD, Section 45 group relief

15%

Depreciation Allowances

Industrial Building Allowance, Commercial Building Allowance, Plant & Machinery pooling system, balancing adjustments

10%

Tax Administration & Anti-Avoidance

Assessment procedures, objections to Board of Review, Section 61/61A anti-avoidance provisions

Preparing for the TIHK CTA Paper 2 Exam

What You Need to Know

Passing score: 50%
Assessment: Performance-based assessment
Time limit: 3 hours
Exam / certification fees: HK$1,600 Official sources

Using Our Practice Resources

Work through all 21 available questions
Review every answer and explanation
Track weak areas and revisit them
Use our AI tutor for tough concepts

TIHK CTA Paper 2: Suggested Study Strategy

1Master the Section 14 source principle of profits and key court precedents (e.g. HK-TVB International, Magna Industrial)

2Practice worked calculations for Salaries Tax progressive vs standard rates and Personal Assessment tax relief

3Learn the exact statutory conditions for interest expense deductibility under Section 16(2)

4Understand Plant & Machinery pooling system mechanics, initial allowances (60%), and balancing charge calculations

5Review Stamp Duty Section 45 intragroup relief eligibility criteria and 2-year clawback rules

Frequently Asked Questions

What is the format of TIHK CTA Paper 2?

TIHK CTA Paper 2 is a 3-hour closed-book written examination conducted in English by The Taxation Institute of Hong Kong. It features essay questions and practical tax computation cases on Hong Kong tax law. This online bank provides 100 multiple-choice study questions to help master core concepts and calculation techniques.

What topics are covered on CTA Paper 2 Hong Kong Tax?

CTA Paper 2 covers Profits Tax (35%), Salaries Tax and Personal Assessment (25%), Property Tax and Stamp Duty (15%), Depreciation Allowances (15%), and Tax Administration and Anti-Avoidance under the Inland Revenue Ordinance (10%).

How much is the exam fee for TIHK CTA Paper 2?

The examination fee for TIHK CTA Paper 2 is HK$1,600 per paper, payable directly to The Taxation Institute of Hong Kong upon exam enrollment.

Is TIHK CTA Paper 2 conducted in English or Chinese?

TIHK CTA Paper 2 (Hong Kong Tax) is conducted in English. (Only Paper 4 PRC Tax is set and answered in Chinese).