20+ Free TIHK CTA Paper 3 Practice Questions

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2026 Statistics

Key Facts: TIHK CTA Paper 3 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 3 (International Tax) is a 3-hour closed-book written examination testing advanced international tax law, double taxation treaty application, transfer pricing methods, and global anti-avoidance rules. The exam fee is HK$1,600 per paper. This free English practice bank provides structured study questions covering OECD Articles, transfer pricing adjustments, and Pillar 2 top-up tax calculations.

Sample TIHK CTA Paper 3 Practice Questions

Try these sample questions to test your TIHK CTA Paper 3 exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 20+ question experience with AI tutoring.

1Under Article 5 of the OECD Model Tax Convention, what is the minimum duration threshold for a building site, construction or installation project to constitute a Permanent Establishment (PE)?

A.6 months

B.12 months

C.18 months

D.24 months

Explanation: Under Article 5(3) of the OECD Model Tax Convention, a building site or construction or installation project constitutes a PE only if it lasts more than 12 months. (Note: under the UN Model Convention, the threshold is 6 months).

2Under the BEPS Pillar 2 Global Anti-Base Erosion (GloBE) rules, what is the global minimum effective tax rate (ETR) threshold required for in-scope Multinational Enterprise (MNE) groups?

A.10%

B.12.5%

C.15%

D.20%

Explanation: The Pillar 2 GloBE rules establish a global minimum effective tax rate of 15% for MNE groups with annual consolidated revenues of EUR 750 million or more. If an MNE ETR in a jurisdiction is below 15%, a top-up tax is levied.

3Which OECD transfer pricing method evaluates whether the price charged in a controlled transaction is consistent with the price charged in a comparable uncontrolled transaction between independent entities?

A.Comparable Uncontrolled Price (CUP) Method

B.Transactional Net Margin Method (TNMM)

C.Cost Plus Method

D.Resale Price Method

Explanation: The Comparable Uncontrolled Price (CUP) method compares the price charged for property or services transferred in a controlled transaction to the price charged in a comparable uncontrolled transaction in comparable circumstances. It is the most direct traditional transaction method.

4Under Article 4(2) of the OECD Model, if an individual is a tax resident of two Contracting States under their domestic laws, which tie-breaker rule is evaluated FIRST?

A.Centre of vital interests

B.Habitual abode

C.Permanent home available to the individual

D.Nationality

Explanation: Article 4(2) specifies the sequential tie-breaker order for dual-resident individuals: (1) Permanent home available, (2) Centre of vital interests (personal/economic relations), (3) Habitual abode, (4) Nationality, and (5) Mutual Agreement Procedure.

5Under BEPS Action 15 Multilateral Instrument (MLI), what is the minimum standard required for anti-treaty abuse that ALL participating jurisdictions must adopt?

A.A Limitation on Benefits (LOB) rule only

B.The Principal Purpose Test (PPT), or PPT supplemented by a LOB rule

C.Complete exemption of capital gains

D.Mandatory binding arbitration

Explanation: Under BEPS Action 6 and MLI Article 7, the minimum standard against treaty abuse requires jurisdictions to implement either (1) a Principal Purpose Test (PPT) alone, or (2) a PPT together with a simplified or detailed Limitation on Benefits (LOB) provision.

6Sub A performs manufacturing services for Parent B. Direct production costs are HK$2,000,000. Based on a transfer pricing benchmark study, the arm length Cost Plus markup is 15%. What is the arm length transfer price?

A.HK$2,300,000

B.HK$2,000,000

C.HK$2,600,000

D.HK$1,700,000

Explanation: Under the Cost Plus method: Arm length price = Costs * (1 + Markup %) = HK$2,000,000 * 1.15 = HK$2,300,000.

7Company M derives foreign branch profits of HK$500,000 which paid foreign tax of HK$120,000 (24%). Under the ordinary credit method where the home tax rate is 16.5%, what is the maximum foreign tax credit allowable?

A.HK$82,500

B.HK$120,000

C.HK$37,500

D.HK$0

Explanation: Under the ordinary credit method, foreign tax credit is capped at the home tax attributable to the foreign income (HK$500,000 * 16.5% = HK$82,500). The excess foreign tax paid (HK$37,500) cannot be credited.

8Under Article 10 (Dividends) of the OECD Model Tax Convention, what condition must be met for a parent company to qualify for the reduced 5% withholding tax rate on direct investment dividends?

A.Hold at least 25% of the capital of the company paying dividends throughout a 365-day period

B.Hold 100% of voting shares for 5 years

C.Be a state-owned enterprise

D.Reinvest all dividends in local real estate

Explanation: Under Article 10(2)(a) of the OECD Model (as updated by MLI), the 5% reduced withholding rate applies if the beneficial owner is a company holding directly at least 25% of the capital of the paying company throughout a 365-day period.

9Which article of the OECD Model Tax Convention governs the Exchange of Information upon Request (EOIR) and Automatic Exchange of Information (AEOI/CRS)?

A.Article 26

B.Article 24

C.Article 15

D.Article 7

Explanation: Article 26 of the OECD Model Tax Convention authorizes the exchange of information foreseeably relevant for carrying out treaty provisions or domestic tax laws. It provides the legal basis for tax information exchange and Common Reporting Standard (CRS).

10Under the OECD Transfer Pricing Guidelines, what does the DEMPE acronym stand for in assessing profit allocation for intangible assets?

A.Development, Enhancement, Maintenance, Protection, and Exploitation

B.Design, Execution, Management, Production, and Evaluation

C.Delivery, Engineering, Manufacturing, Promotion, and Export

D.Data, Encryption, Monitoring, Processing, and Execution

Explanation: DEMPE stands for Development, Enhancement, Maintenance, Protection, and Exploitation of intangibles. Profits from intangibles must be allocated to entities performing and controlling these DEMPE functions and bearing associated risks.

About the TIHK CTA Paper 3 Exam

Official qualifying examination paper for the Chartered Tax Adviser (CTA) designation in Hong Kong. Covers international tax principles, OECD Model Tax Convention, transfer pricing, BEPS, and Pillar 2 minimum taxation.

Assessment

Performance-based assessment

Time Limit

3 hours

Passing Score

50%

Exam Fee

HK$1,600 (The Taxation Institute of Hong Kong (TIHK))

TIHK CTA Paper 3 Exam Content Outline

30%

Tax Treaties & OECD Model Convention

Double Taxation Agreements (DTAs), OECD vs UN Model Articles, residence tie-breakers, PE status, passive income articles

25%

Transfer Pricing Principles & Methods

Arm's length principle, CUP, Resale Price, Cost Plus, TNMM, Profit Split, DEMPE functions, documentation

25%

BEPS & International Anti-Avoidance

BEPS Action Plan, Multilateral Instrument (MLI), Principal Purpose Test (PPT), Pillar 1, Pillar 2 GloBE 15% minimum tax

20%

Principles of Double Taxation Relief

Residence vs source principles, credit method vs exemption method, foreign tax credit computations

How to Pass the TIHK CTA Paper 3 Exam

What You Need to Know

Passing score: 50%
Assessment: Performance-based assessment
Time limit: 3 hours
Exam fee: HK$1,600

Keys to Passing

Work through all 20 available questions
Review every answer and explanation
Track weak areas and revisit them
Use our AI tutor for tough concepts

TIHK CTA Paper 3 Study Tips from Top Performers

1Memorize the key articles of the OECD Model Convention (Articles 4, 5, 7, 10, 11, 12, 13, 15, 23A/23B, 25, 26)

2Master the 5 OECD transfer pricing methods and understand when CUP or TNMM is most appropriate

3Understand the DEMPE framework for allocating profits from intangibles

4Practice Pillar 2 GloBE Effective Tax Rate (ETR) calculations and top-up tax determination

5Learn how the Multilateral Instrument (MLI) modifies existing covered tax agreements via the Principal Purpose Test (PPT)

Frequently Asked Questions

What is covered on TIHK CTA Paper 3 International Tax?

CTA Paper 3 covers Tax Treaties and the OECD Model Convention (30%), Transfer Pricing Principles and Methods (25%), BEPS and International Anti-Avoidance including Pillar 2 (25%), and Principles of Double Taxation Relief (20%).

What is the format of TIHK CTA Paper 3?

TIHK CTA Paper 3 is a 3-hour closed-book written examination in English conducted by The Taxation Institute of Hong Kong. This online practice bank provides 100 multiple-choice questions aligned to the official syllabus.

How much is the examination fee for CTA Paper 3?

The examination fee for TIHK CTA Paper 3 is HK$1,600 per paper, payable upon enrollment to The Taxation Institute of Hong Kong.