Scientific research and development

ISIC 72 is categorized as a Qualifying Activity under the 'Research and Development' head. Forensic scrutiny focuses on the 'Modified Nexus Approach' where the 0% rate applies only to income derived from 'Qualifying Intellectual Property'. Auditors will verify the ratio of 'Qualifying Expenditure' (incurred by the QFZP) against 'Total Expenditure' to ensure the tax benefit is not artificially inflated by acquired IP or non-qualifying outsourcing.

Audit Red Flag

Outsourcing of Core Income Generating Activities (CIGA) to mainland or foreign third parties without adequate supervision or local qualified personnel.

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