Max is a PRC citizen. He bought a residential property in Hong Kong for investment purposes, financed by his past savings and mortgage loans. Max has leased the residential property on the following terms:

1. Lease period: three years, effective from 1 April 2019 to 31 March 2022

2. The rent is $ 25,000 per month

3. Initial premium of $ 50,000

4. The property agency fee was $8,500, paid on the signing of the lease

5. The residential property needed to be renovated before it could be lease out. The renovation cost of $20,000 is incurred,

6. Rates per quarter are $2,250, payable by Max

Required:

(a) With reference to the territorial principle, advise Max if his rental income is subject to Hong Kong property tax.

(b) Prepared a schedule to compute Max s property tax liability for the years of assessment 2019/2020.

(c) Briefly explain the tax treatment you have applied to items (4) to (6) above.

(d) If Max decides to sell the property on 1 May 2020, discuss how the premium spread over and chargeable to Max as a result of the sale of the flat.