B (61 marks) Answer ALL questions from this section. Question 11 (10 marks) Mr Leung is a Hong Kong resident and the marketing manager of Tin's Limited, a company incorporated in Hong Kong and carries on business in Hong Kong. The company set up a branch in Dongguan in March 2013 and Mr Leung was seconded to Dongguan. He stationed in Dongguan and came back to Hong Kong twice a month to report to the managing director about the Dongguan operations and visit his family. During the year ended 31 March 2014, he stayed in Hong Kong for 50 days, and received the following remuneration (paid to his bank account in Hong Kong and in Hong Kong dollars): (1) Salary: $1,000,000 (2) Holiday journey to Europe with the family: $62,000 As he stayed in Mainland China for over 183 days, he paid Chinese individual income tax of $250,000 on his income of $600,000. Mr Leung contributed 5% of his salaries for the MPF. Mr Leung's wife is a housewife and has no employment income. His elder son is 19 years old studying in a university in Australia, and his younger daughter is 14 years old studying in a secondary school in Hong Kong. Required: Compute Mr Leung's salaries tax liability for the year of assessment 2013/2014. Ignore provisional salaries tax and tax rebate or reduction, if any. State clearly the basis of your calculation. (10 marks) Year of assessment Summary of Deductions, Tax Rates and Personal Allowances 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Standard Rate (Salaries tax, property 15% 15% 15% 15% 15% 15% tax and personal assessment) Progressive Rates Upon the first $40,000 2% 2% 2% 2% Upon the first $45,000 2% Upon the first $50,000 2% Upon the next $40,000 7% 7% 7% 7% Upon the next $45,000 7% Upon the next $50,000 6% Upon the next $40,000 12% 12% 12% 12% Upon the next $45,000 12% Upon the next $50,000 10% Upon the next $50,000 14% Upon the remainder 17% 17% 17% 17% 17% 17% Profits tax- 16.5% 16.5% 16.5% 16.5% 16.5% 16.5% Corporation Year of assessment Personal Allowances Basic 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 $ S $ $ S 120,000 Married person's 240,000 Child 1 to 9th (each) 70,000 For each child born during 70,000 70,000 70,000 120,000 120,000 240,000 240,000 264,000 100,000 100,000 132,000 132,000 132.000 264,000 264,000 100,000 100,000 120,000 100,000 100,000 120,000 the year, the Child Allowance will be increased by Dependent parent/ grandparent (each) Basic 38,000 40,000 Additional 38,000 40,000 - 40,000 46,000 46,000 40,000 46,000 46,000 50,000 50,000 Dependent parent/ grandparent (each aged 55-59) Basic 19,000 20,000 Additional 19,000 20.000 20,000 23,000 23,000 20,000 23.000 25.000 23.000 25,000 Dependent brother/sister 33,000 33,000 33,000 33,000 37,500 37,500 (each) Disabled dependent (each) 66,000 66,000 66,000 66,000 75,000 75,000 Deductions $ S $ $ $ S Elderly residential care 76,000 80,000 80,000 92,000 92,000 100,000 expenses (maximum) Self-education expenses 80,000 80,000 80,000 80,000 100,000 100,000 (maximum) Home loan interest 100,000 100,000 100,000 100,000 100,000 100,000 (maximum) Contributions to recognised 15,000 17,500 18,000 18,000 18,000 18,000 retirement schemes (maximum) Approved charitable donations 35% 35% 35% 35% 35% 35% Year of assessment Depreciation Allowances 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Plant and Machinery- 60% 60% 60% 60% 60% 60% Initial Allowance Industrial Building- 20% 20% 20% 20% 20% 20% Initial Allowance Annual Allowance 4% 4% 4% 4% 4% 4% Commercial Building 4% 4% 4% 4% 4% 4% Allowance CIR - Commissioner of Inland Revenue IRD-Inland Revenue Department MPF-Mandatory Provident Fund Abbreviations