Matthew is employed by Fun and Joy Ltd (the Company), a company resident in Hong Kong, as project manager in charge of the Companys construction project in Macao. He commenced this employment in April 2015. The following information is available in respect of Matthew for the year ended 31 March 2017 (unless otherwise stated):

1 His salary was $70,000 per month.

2 Matthew returns to Hong Kong every Saturday afternoon to stay with his family and goes back to Macao on Monday morning. He also comes back to Hong Kong during his vacations. During the year ended 31 March 2017, Matthew was in Hong Kong for a total of 160 days. Matthew was rarely required to perform any duties in Hong Kong, except to attend short meetings in Hong Kong to update the management on the progress of the project.

3 Matthew received fees of $125,000 from several overseas companies, which have previously supplied construction materials to the Company. The Company agreed that Matthew can keep the amount.

4 Remuneration for Matthews services rendered in Macao is subject to income tax in Macao, and Matthew was advised to pay $35,000 to the Macao tax authority based on the determination that $350, 000 of his remuneration was subject to income tax there. Matthew settled the tax payment with the Macao tax authority within the time specified by the Macao tax authority.

5 While working in Macao, Matthew would stay in a flat provided by the Company. The Company charged Matthew $3,000 per month to stay in the flat. (See also note 7 below.)

6 Meals were provided free of charge to Matthew at the construction site, and that cost the Company $8,000 per month. Matthew was given a choice if he chose not to take meals at the construction site, he would be given a monthly allowance of $5,000. Matthew chose to eat at the construction site.

7 On 1 January 2017, Matthew purchased a flat from the Company for $8,800,000. The market value of the flat at that date was $9,000,000. The flat was since used as the residence of Matthew during his stay in Macao. The cost of his travelling expenses between Hong Kong and Macao of $3,000 per month was paid directly by the Company to the service provider.

8 In September 2016, Matthew was hurt in an accident while engaging in some sports activities during his spare time. As a result, Matthew stayed in a hospital for three days. The total hospital bill amounted to $75,000. The Companys medical insurance scheme reimbursed $39,000 to Matthew, while the balance was reimbursed by the Company. Other than medical insurance, the Company operates a MPF scheme which requires contribution from both employer and employee at 5% of the monthly salary.

9 Matthews wife is a housewife. The couple have two children aged 22 and 25. The 22-year-old son was a full-lime student at Sydney Polytechnic University until June 2017, when he graduated. He is now working as a staff accountant with a big accounting firm in Sydney, Australia. The 25-year-old daughter was a graduate student at The Chinese University of Hong Kong. She lived in college at the University and is employed part-time by the University as a teaching assistant for a salary of $10.000 per month.

10 Matthew (when he was in Hong Kong) and his family lived with Matthews mother (aged 70) in a flat in Shatin. In September 2016, his mother was suddenly taken ill and Matthew was then forced to put her in a nursing home because she needed full-time medical care. His total payments to the nursing home for residential care amounted to $100,000 for the period to 31 March 2017.

11 During the year, Matthew and his wife made cash donations of $25,000 and $10,000 respectively to various charities registered in Hong Kong.

12 Matthew is a full member of the Hong Kong Society of Engineers and the China Institute of Engineers, to which he paid annual subscriptions of $3,000 and $5,000 respectively during the year.

Required

a Evaluate Matthews situation and explain whether Matthews income from this employment should be subject to salaries tax in Hong Kong. Your answer should include consideration of any exemption he may be able to obtain.

b Assuming that Matthew is chargeable to salaries tax in Hong Kong, determine the salaries tax payable by Matthew for the year of assessment 2016/17, making the best election where applicable. (Ignore provisional salaries tax, any tax waiver or tax reductions in your calculation.)

https://www.guidemehongkong.com/business-guides/supporting-a-business/hong-kong-tax-rates-and-income-tax-system

https://www.gov.hk/en/nonresidents/workinghk/taxinhk/taxobligations.htm