Mr. Fong is the Senior Sales Manager of Cocoa Limited (Cocoa) and he is subject to Hong Kong salaries tax under section 8(1) of the Inland Revenue Ordinance. He provided you with the following information relating to his employment for the year ended 31 March 2019:

Note:

1. His monthly salary was HK$120,000 and he received a commission in the sum of HK$100,000 in March 2019.

2. He was provided with a flat by Cocoa rent-free at North Point, Hong Kong. However, he was required to pay the management fee of HK$2,000 per month. The flat was rented by Cocoa from the landlord at HK$48,000 per month.

3. Cocoa gave him two air tickets with hotel accommodation package to Tokyo, Japan in December 2018. Cocoa directly contracted with the travel agency and it paid HK$22,000 for this holiday package, which had a resale value of HK$16,500. Mr. Fong spent the holiday in Tokyo with his wife for Christmas in 2018.

4. During the year Cocoa paid an insurance premium of HK$1,700 for Mr. Fongs share of medical benefit under a corporate medical insurance scheme. Mr. Fong obtained a refund of HK$7,800 from the insurance company for medical expenses incurred by him during the year.

5. He was provided with a company car by Cocoa. Fuel expenses incurred by him amounting to HK$40,000 during the year. No refund was made by Cocoa to him for the fuel expenses. Business use portion of the car was agreed with the Inland Revenue Department to be 70%.

6. He was required by Cocoa to join the Good-health Fitness Club so that he could meet and entertain the existing and potential customers. He paid club fee of HK$9,000 during the year. Cocoa refunded the full amount of the club fee to him.

7. On 28 April 2018, he was granted a share option (free of charge) to subscribe for 10,000 shares in Cocoa at HK$8.5 each. On 21 June 2018, he exercised the option to buy 6,000 shares, of which 4,000 shares were disposed in the market on 19 August 2018. He assigned the remaining option right to his colleague for HK$12,000 on 29 January 2019. The fair market value per share on respective dates was as follows:

28 April 2018 21 June 2018 19 August 2018 29 January 2019

HK$10 HK$11 HK$13 HK$14

8. He enrolled in a part-time master degree course in Marketing offered by a local university and paid tuition fee of HK$168,000 during the year. He did not receive any re-imbursement or subsidy from Cocoa for this study.

9. During the year he contributed HK$30,000 to Cocoas recognised retirement scheme.

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Question 1 (cont) Additional Information:

1. His wife, Mrs. Fong, worked as a receptionist in a local trading company during the year. She received a monthly salary of HK$9,000 during the year from her employer. She contributed 5% of her salary, that is, HK$5,400 to the Mandatory Provident Fund scheme during the year.

2. Mr. and Mrs. Fong maintained two children who were aged 24 and 17 during the year. The elder daughter was studying full-time at a university in Hong Kong during the year ended 31 March 2019 and she got married the prior year on 20 March 2018.

3. Mrs. Fongs father and mother, aged 61 and 59 respectively during the year, were residing with Mr. and Mrs. Fong in their flat in North Point, Hong Kong throughout the year ended 31 March 2019.

Required:

Prepare the salaries tax computation under Joint Assessment for Mr. and Mrs. Fong for the year of assessment 2018/19. You may assume that the couple will avail themselves to whatever relief available to minimise their overall tax liability.

(Show the detailed steps in the computation. Explanatory notes writing is NOT required and ignore provisional tax in the computation.)