Annual Report 2021

NOTESTOTHE CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 2021 97 The United Laboratories International Holdings Limited Annual Report 2021 11. TAX EXPENSE (Continued) 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 2021 and 2020, 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: 2021 2020 RMB’000 RMB’000 Profit before taxation 1,202,647 882,334 Tax at the PRC EIT rate of 25% (2020: 25%) 300,662 220,584 Tax effect of expenses not deductible for tax purpose 31,889 114,511 Tax effect of income not taxable for tax purpose (13,341) (22,109) Tax effect of super deduction of research and development expenses (Note) (81,312) (54,047) Tax effect of tax losses not recognised 13,050 28,861 Utilisation of tax losses previously not recognised (81,655) (55,503) Tax effect of deductible temporary differences not recognised 74,641 17,793 PRC withholding tax on distributable profits of the PRC subsidiaries 61,684 41,779 PRC withholding tax on interest income 4,536 9,253 Effect of tax concessionary rates granted to the PRC subsidiaries (97,011) (106,226) Others (81) (13,480) Tax expense for the year 213,062 181,416 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 2021 and 2020.