Mr. Chen is a Hong Kong resident and has been employed as the Business Manager by Manson Company Ltd. ("MCL"), a listed company incorporated and carrying on business in Hong Kong. During the year ended 31 March 2020, Mr. Chen has the following income and expenditure: 1. Monthly salary of $100,000 e 2. He received a bonus of $40,000 on 5 May 2019. The bonus was a discretionary bonus in recognition of his excellent performance on business development in the financial year ended 31 March 2019. It was approved during a board of directors' meeting held on 15 March 2019, 3. As part of his total compensation, Mr. Chen received housing allowance from MCL $15,000 per month, and this amount was deposited to his bank account on pay dates. 4. Also, he obtained monthly reimbursement from MCL regarding the salary of his domestic helper that he hired in 2019. Mr. Chen paid her $4,500 per month. 5. On 1 November 2019, Mr. Chen received a $12,000 travel coupon that was purchased by MCL from his boss which would allow him to spend his Christmas holidays in Europe. However, it turned out that he was not able to spare any time to travel during Christmas. On 1 December 2019, he sold the travel coupon to one of his friends at $10,000. 6. On 1 June 2019, Mr. Chen was granted an option to buy the shares of MCL's parent company which was incorporated in the United Kingdom. The shares were listed on the London Stock Exchange. The option enabled Mr. Chen to buy 10,000 shares at a price of $5 per share and carried an expiry date of 31 March 2020. On 1 September 2019, Mr. Chen exercised the option to buy 5,000 shares and sold the option to buy 2,000 shares to a colleague for $13,000. The 5,000 shares were then sold on 1 October 2019. The remaining option expired on 31 March 2020. Details of share market value were: i. iii. iv. v. 1 April 2019 1 June 2019 1 September 2019 1 October 2020 31 March 2020 $22 $25 $29 $31 $26 7. In order to equip himself with updated knowledge, Mr. Chen enrolled for an evening course on Chinese Auditing with the City University of Hong Kong and paid a tuition fee of $45,000. The enrollment is fully supported by MCL which planned to expand its business in the Chinese Mainland. However, MCL did not approve any refund for the tuition fee. 2 8. During the year, Mr. Chen made various charitable donations in an aggregate amount of $380,000 to the approved charitable organizations. 9. In the year of assessment 2019/20, he made employee mandatory contribution to the MPF of $18,000. Also, he contributed $30,000 to his -deductible Voluntary Contribution (TVC) account. 10. During the same year, he paid qualifying annuity premiums of $40,000 to subscribe an annuity plan for himself. enrollment is fully supported by MCL which planned to expand its business in the Chinese Mainland. However, MCL did not approve any refund for the tuition fee. 3 sur 3 2 8. During the year, Mr. Chen made various charitable donations in an aggregate amount of $380,000 to the approved charitable organizations. 9. In the year of assessment 2019/20, he made employee mandatory contribution to the MPF of $18,000. Also, he contributed $30,000 to his ax-deductible Voluntary Contribution (TVC) account. 10. During the same year, he paid qualifying annuity premiums of $40,000 to subscribe an annuity plan for himself Required: Compute the salaries tax liabilities of Mr. Chen for the year of assessment 2019/20 (ignored provisional salaries tax and tax rebate). You must show all workings but no written explanation is required (20 marks) ii. From the information given above, identify two areas and also discuss in each of these areas how Mr. Chen's compensation could be structured in a more tax efficient manner. (10 marks) It is not necessary to cite tax case names or section numbers of the Inland Revenue Ordinance. However, the discussion of relevant tax principles is needed to support your argument. Also, revised salaries tax computation of Mr. Chen NOT needed. Mr. Chen is a Hong Kong resident and has been employed as the Business Manager by Manson Company Ltd. ("MCL"), a listed company incorporated and carrying on business in Hong Kong. During the year ended 31 March 2020, Mr. Chen has the following income and expenditure: 1. Monthly salary of $100,000 e 2. He received a bonus of $40,000 on 5 May 2019. The bonus was a discretionary bonus in recognition of his excellent performance on business development in the financial year ended 31 March 2019. It was approved during a board of directors' meeting held on 15 March 2019, 3. As part of his total compensation, Mr. Chen received housing allowance from MCL $15,000 per month, and this amount was deposited to his bank account on pay dates. 4. Also, he obtained monthly reimbursement from MCL regarding the salary of his domestic helper that he hired in 2019. Mr. Chen paid her $4,500 per month. 5. On 1 November 2019, Mr. Chen received a $12,000 travel coupon that was purchased by MCL from his boss which would allow him to spend his Christmas holidays in Europe. However, it turned out that he was not able to spare any time to travel during Christmas. On 1 December 2019, he sold the travel coupon to one of his friends at $10,000. 6. On 1 June 2019, Mr. Chen was granted an option to buy the shares of MCL's parent company which was incorporated in the United Kingdom. The shares were listed on the London Stock Exchange. The option enabled Mr. Chen to buy 10,000 shares at a price of $5 per share and carried an expiry date of 31 March 2020. On 1 September 2019, Mr. Chen exercised the option to buy 5,000 shares and sold the option to buy 2,000 shares to a colleague for $13,000. The 5,000 shares were then sold on 1 October 2019. The remaining option expired on 31 March 2020. Details of share market value were: i. iii. iv. v. 1 April 2019 1 June 2019 1 September 2019 1 October 2020 31 March 2020 $22 $25 $29 $31 $26 7. In order to equip himself with updated knowledge, Mr. Chen enrolled for an evening course on Chinese Auditing with the City University of Hong Kong and paid a tuition fee of $45,000. The enrollment is fully supported by MCL which planned to expand its business in the Chinese Mainland. However, MCL did not approve any refund for the tuition fee. 2 8. During the year, Mr. Chen made various charitable donations in an aggregate amount of $380,000 to the approved charitable organizations. 9. In the year of assessment 2019/20, he made employee mandatory contribution to the MPF of $18,000. Also, he contributed $30,000 to his -deductible Voluntary Contribution (TVC) account. 10. During the same year, he paid qualifying annuity premiums of $40,000 to subscribe an annuity plan for himself. enrollment is fully supported by MCL which planned to expand its business in the Chinese Mainland. However, MCL did not approve any refund for the tuition fee. 3 sur 3 2 8. During the year, Mr. Chen made various charitable donations in an aggregate amount of $380,000 to the approved charitable organizations. 9. In the year of assessment 2019/20, he made employee mandatory contribution to the MPF of $18,000. Also, he contributed $30,000 to his ax-deductible Voluntary Contribution (TVC) account. 10. During the same year, he paid qualifying annuity premiums of $40,000 to subscribe an annuity plan for himself Required: Compute the salaries tax liabilities of Mr. Chen for the year of assessment 2019/20 (ignored provisional salaries tax and tax rebate). You must show all workings but no written explanation is required (20 marks) ii. From the information given above, identify two areas and also discuss in each of these areas how Mr. Chen's compensation could be structured in a more tax efficient manner. (10 marks) It is not necessary to cite tax case names or section numbers of the Inland Revenue Ordinance. However, the discussion of relevant tax principles is needed to support your argument. Also, revised salaries tax computation of Mr. Chen NOT needed