Company: FEBO
Filing Date: 2025-05-14
Form Type: 20-F
Source: 0001641172-25-010075
Chunk: 109

Company: Fenbo Holdings Ltd
Filing Date: 2025-05-14
Form: 20-F
Item: Item 5
Chunk 109
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 cost of raw materials, direct labor costs and factory overhead.

Value-Added Taxes (“ VAT”)

The Hong Kong operations are not
subject to the value-added tax. For the PRC operations, the PRC export revenue is not subject to VAT. VAT are charged for purchase of
materials at 17% of which 13% is refundable. Revenues are presented net of applicable VAT.

Income Taxes

The Company accounts for income
taxes in accordance with the laws of the relevant tax authorities. The charge for taxation is based on the results for the fiscal year
as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively
enacted by the balance sheet date.

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Deferred taxes are accounted for
using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets
and liabilities in the consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit.
In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the
extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred
tax is calculated using tax rates that are expected to apply to the period when the asset is realized, or the liability is settled. Deferred
tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which
case the deferred tax is also dealt with in equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided
for in accordance with the laws of the relevant taxing authorities.

An uncertain tax position is recognized
as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax
examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being
realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. No penalties
and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred.

Recent Accounting Pronouncements

See the discussion of the recent
accounting pronouncements contained in Note 2 to the consolidated financial statements