Annual Report 2020

NOTESTOTHE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2020 93 The United Laboratories International Holdings Limited Annual Report 2020 11. TAX EXPENSE (Continued) Pursuant to the PRC EIT law and its detailed implementation rules promulgated on 16 March 2007 and 6 December 2007, respectively, the tax rate for domestic and foreign enterprises is unified at 25% and is effective from 1 January 2008. Besides, with effect from 1 January 2008, if the subsidiaries are qualified as high-technology companies (under the new PRC EIT law), the subsidiaries are entitled to a reduced rate of 15% and such qualification is subject to renewal for every three years. Certain of group entities in the PRC are entitled to the reduced tax rate of 15% for 2020 and 2019. According to a joint circular of Ministry of Finance and State Administration of Taxation, Cai Shui 2008 No.1, dividend distributed out of the profits generated since 1 January 2008 by a PRC entity to a non-PRC tax resident shall be subject to the PRC EIT pursuant to Articles 3 and 27 of the Income Tax Law Concerning Foreign Investment Enterprises and Foreign Enterprises and Article 91 of the Detailed Rules for the Implementation of the Income Tax Law for Enterprises with Foreign Investment and Foreign Enterprises. The withholding tax rate applicable to the Group is 5%. At 31 December 2020 and 2019, deferred tax was provided for in full in respect of the temporary differences attributable to such profits. The tax expense for the year can be reconciled to the profit before taxation per the consolidated statement of profit or loss and other comprehensive income as follows: 2020 2019 RMB’000 RMB’000 Profit before taxation 882,334 841,652 Tax at the PRC EIT rate of 25% (2019: 25%) 220,584 210,413 Tax effect of expenses not deductible for tax purpose 114,511 93,654 Tax effect of income not taxable for tax purpose (22,109) (13,229) Additional tax arising from disposal of a subsidiary – 7,889 Tax effect of super deduction of research and development expenses (Note) (54,047) (64,380) Underprovision in prior year – 330 Tax effect of LAT and other associated tax arising on fair value change of investment properties – (20,858) Tax effect of tax losses not recognised 28,861 27,814 Utilisation of tax losses previously not recognised (55,503) (2,426) Tax effect of deductible temporary differences not recognised 17,793 – PRC withholding tax on distributable profits of the PRC subsidiaries 41,779 40,847 Effect of tax concessionary rates granted to the PRC subsidiaries (106,226) (85,044) Others (4,227) 4,878 Tax expense for the year 181,416 199,888 Note: Pursuant to Caishui [2018] circular No. 99, the Group is able to enjoy super deduction of 175% on qualifying research and development expenditures for the years ended 31 December 2020 and 2019.