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Schedule 2

(Section 7A)

FORMULA

In determining whether income qualifies for an exemption under section 11(7), the formula is —

“A” represents the qualifying expenditure —

(a) if the expenditure is directly connected to the intellectual property asset and is related to research and development and expenditure from unrelated party outsourcing,

(b) if the expenditure is not directly associated with the research and development of a particular intellectual property asset, the expenditure is divided proportionately across intellectual property assets and products,

to develop the intellectual property asset;

“B” represents the overall expenditure incurred to develop the intellectual property asset and includes research and development expenditure, expenditure of unrelated party outsourcing, acquisition costs and expenditure for related party outsourcing;

“C” represents the overall income arising from the intellectual property asset; and

“D” represents the income receiving the tax benefits.