Manufacture of games and toys

Manufacturing is a Qualifying Activity. Forensic audit will focus on the 'substantial transformation' test to ensure the activity is not merely 're-packaging' or 'labeling' which would reclassify the income as non-qualifying trading income if sold to mainland customers.

Audit Red Flag

Intercompany pricing of intellectual property (IP) for toy designs where the R&D is performed in the mainland but the manufacturing margin is booked in the Free Zone.

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