TAXATION

Schedule of reconciliation between the income tax (benefit)/expenses computed by applying the Hong Kong enterprise tax rate to income before income taxes and actual provision


	Year ended December 31,
	2018	2019	2020

	(HK$ in thousands)
Income before income tax	200,800	178,493	1,450,623

Tax expenses at Hong Kong profit tax rate of 16.5%	33,132	29,451	239,353
Changes of valuation allowance	9,735	30,172	14,348
Tax effect of permanence differences	6,825	5,486	9,029
Effect of income tax in jurisdictions other than Hong Kong	12,670	(4,143)	(4,386)
Super deduction of research and development expenses	—	(19,277)	(29,081)
Final settlement differences	—	(18,038)	—
Income not subject to tax (1)	—	(11,365)	(104,470)
Others	(74)	—	—
Income tax expenses	62,288	12,286	124,793

(1)

This amount mainly represents tax exemption relating to the offshore income of Futu Securities. The brokerage commission income derived from executing the clients' orders of US listed securities was treated as offshore-sourced and non-taxable on the basis that these transactions were executed outside Hong Kong.

Schedule of movement of valuation allowance


	Year ended December 31,
	2018	2019	2020

	(HK$ in thousands)
Balance at beginning of the year	13,514	23,249	53,421
Additions	9,735	30,188	30,935
Reversals	—	(16)	(16,587)
Balance at end of the year	23,249	53,421	67,769