Annual Report 2022

195 2022 Annual Report Transport International Holdings Limited NOTES TO THE FINANCIAL STATEMENTS (Expressed in Hong Kong dollars unless otherwise indicated) 5 Profit before taxation (continued) Note a: Under the revised Modified Basket of Factors (“MBOF”) approach, which is the existing basis for the assessment of bus fare adjustment applications, 50% of any return on a franchised bus operator in a given year in excess of a prescribed triggering point of return on its average net interest in leasehold land and other property, plant and equipment is required to be set aside and accumulated in a balance of passenger reward, which would be available to relieve the pressure for future fare increases and to facilitate the offer of bus fare concessions. The prescribed triggering point of return for 2022 and 2021 was 8.7% per annum. The balance of passenger reward of the Group as at 31 December 2022, included in accounts payable and accruals (note 25), was $Nil (2021: $Nil). Note b: The HKSAR Government announced that with effect from 17 February 2019, all franchised buses are exempted from paying tolls when using Government tunnels and roads. However, each franchised bus operator is required to spend an equivalent amount of the toll saved to set up its own dedicated account known as the “Toll Exemption Fund” which will normally be used to lower the magnitude of future fare increases. In addition, any additional fare revenue resulting from the increase of the bus fare on the jointly operated routes with other franchised bus operators arising from a fare adjustment is required to be paid into the Toll Exemption Fund. The balance of the Toll Exemption Fund of the Group as at 31 December 2022, included in accounts payable and accruals (note 25), was $450,374,000 (2021: $417,258,000). The drawdown from the Toll Exemption Fund of $49,428,000 was recognised in the consolidated statement of profit or loss in 2021. #: Cost of mask production includes depreciation of $415,000 (2021: $415,000), which amount is included in the total amount disclosed in note 5(d) for depreciation. 6 Income tax in the consolidated statement of profit or loss (a) Taxation in the consolidated statement of profit or loss represents: 2022 2021 $’000 $’000 Current tax – Hong Kong Profits Tax Provision for the year 19,563 13,804 Over-provision in respect of prior years (690) (148) 18,873 13,656 PRC withholding tax 978 805 19,851 14,461 Deferred tax Origination and reversal of temporary differences (107,630) 12,588 Actual tax (credit)/expense (87,779) 27,049 The provision for Hong Kong Profits Tax for 2022 is calculated at 16.5% (2021: 16.5%) of the estimated assessable profits for the year, except for a subsidiary of the Group which is a qualifying corporation under the two-tier Profits Tax rate regime. For this subsidiary, the first HK$2 million of assessable profits are taxed at 8.25% and the remaining assessable profits are taxed at 16.5%. (b) Reconciliation between tax (credit)/expense and accounting profit at the applicable tax rates: 2022 2021 $’000 $’000 Profit before taxation 55,861 272,093 Notional tax on profit before taxation, calculated at the rates applicable to profits in the tax jurisdictions concerned 9,625 46,120 Tax effect of non-deductible expenses 18,715 4,600 Tax effect of non-taxable income (116,618) (24,589) Tax effect of unused tax losses not recognised 1,135 1,119 Over-provision in respect of prior years (690) (148) Others 54 (53) Actual tax (credit)/expense (87,779) 27,049