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INCOME TAX
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAX
9.INCOME TAX

 

British Virgin Islands

 

The Company is incorporated in the British Virgin Islands and is not subject to taxation. In addition, upon payments of dividends by these entities to their shareholders, no British Virgin Islands withholding tax will be imposed.

 

Hong Kong

 

Entities incorporated in Hong Kong are subject to Hong Kong profits tax at a rate of 16.5% for taxable income earned in Hong Kong before April 1, 2018. Starting from the financial year commencing on April 1, 2018, the two-tiered profits tax regime took effect, under which the tax rate is 8.25% for assessable profits on the first HK$2 million and 16.5% for any assessable profits in excess of HK$2 million.

 

The Group’s Hong Kong subsidiaries are subject to Hong Kong profits tax on their taxable income as reported in their statutory financial statements adjusted in accordance with relevant Hong Kong tax laws. For these subsidiaries, the first HK$2 million of assessable profits are taxed at 8.25% and the remaining assessable profits are taxed at 16.5%.

 

  (a) Taxation in the statement of operations represents:

 

 

    2023    2024    2025    2025 
    HK$    HK$    HK$    US$ 
Hong Kong profits tax provision (benefits) for the year:                    
Current   —    —    —    — 
Deferred   —    —    —    — 
Income tax expense benefit   —    —    —    — 

 

 

MAGIC EMPIRE GLOBAL LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

9. INCOME TAX (cont.)

 

  (b) The following table reconciles Hong Kong statutory rates to the Group’s effective tax rate:

 

 

   2023   2024   2025 
Hong Kong statutory income tax rate   16.5%   16.5%   16.5%
Effect of non-deductible expenses(1)   (76.5)%   (16.5)%   (10.7)%
Effect of tax rates in foreign jurisdiction   (23.3)%   (4.2)%   (3.8)%
Effect of changes in valuation allowance   (3.9)%   (10.3)%   (8.2)%
Effect of permanent difference(2)   87.2%   14.5%   6.2%
Effective tax rate   —    —    — 

 

  (1) Non-deductible items mainly arise from expenses not deductible for tax purposes primarily including operating expenses from Hong Kong companies which do not generate any assessable profits during the year.
     
  (2) Mainly represents non-taxable interest. In 2023, this also represents the combination of other non-taxable income and deferred true-ups due to non-deductible expenses. In 2024, this also includes the gain on sale of investments.

 

  (c) Income (loss) before income taxes is attributable to the following geographic locations for the years ended December 31:

 

 

   2023   2024   2025   2025 
   HK$   HK$   HK$   US$ 
Hong Kong   195,245    (3,530,735)   (6,413,538)   (824,012)
Foreign   (679,057)   (1,199,117)   (1,895,122)   (243,485)
Total loss before income taxes   (483,812)   (4,729,852)   (8,308,660)   (1,067,497)

 

  (d) Deferred tax:

 

Significant components of the deferred tax assets (liabilities) are presented below: 

  

   2023   2024   2025   2025 
   HK$   HK$   HK$   US$ 
Deferred tax assets:                  
Net operating loss carryforwards   750,087    1,246,723    1,904,590    244,702 
Deferred tax assets   750,087    1,246,723    1,904,590    244,702 
Less: Valuation allowance   (750,087)   (1,246,723)   (1,904,590)   (244,702)
Total deferred tax assets, net   —    —    —    — 

 

The Group evaluated the recoverable amounts of deferred tax assets to the extent that future taxable profits will be available against which the net operating loss and temporary difference can be utilized. As of December 31, 2025, the Group had tax loss carryforwards of approximately HK$11,542,972 (US$1,483,043). The carry forward of tax losses in Hong Kong generally has no time limit. As of December 31, 2025, the deferred tax assets were fully provided as valuation allowance as the Group does not expect to realize its deferred taxes in the near future.

 

As of December 31, 2025 and 2024, the Group had no tax recoverable and no taxes payables.

 

 

MAGIC EMPIRE GLOBAL LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS