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21+ Free TIHK CTA Paper 2 Practice Questions
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2026 Statistics
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 test your TIHK CTA Paper 2 exam readiness. 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 Practice Questions
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