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Mr Apricot Angelfish is an Australian, born in Melbourne. Apricot is a one of the top Michelin Star chefs in the world and has been working in Hong Kong for 20 years. He is a permanent resident in Hong Kong. Apricot is now employed by Banana Limited, a company incorporated in Hong Kong, as the executive chef for a term of three years starting from April 2019 to March 2022. Banana Limited operates a number of hotels in Asia-Pacific region. Below is the summary of the terms in the employment contract: 60,000 6 $ 1. Monthly salary: 64.000 2 Monthly entertainment allowance: 56,000 3. Banana Limited provides a car for Apricot to use. Market value of car: 90,000 Resale value of car: 60,000 Monthly petrol allowance: 3,000 4. Banana Limited provides medical benefits for Apricot. Banana Limited buys a medical insurance policy from Cherry Insurance Limited. The annual premium of the medical insurance policy: 10,000 Annual medical expense coverage: Banana Limited agrees to pay one-fourth of the medical expenses which are not covered by Cherty Insurance Limited. 5 Apricot is free to join any clubs and associations. Banana Limited agrees to reimburse Apricot for the membership/subscription fee of one of the clubs and associations of the choice of Apricot. Banana Limited provides an allowance for Apricot to pay taxes for previous year of assessment: Hong Kong tax: 135,000 Australian tax: 45,000 7. Banana Limited provides a serviced apartment in one of its hotels for Apricot as accommodation deduction of salary for rent expenses: 2% Banana Limited provides Apricot with a low-interest loan of the second mortgage to buy a property in Australia. Apricot stays in the property when he is in Australia. The interest rate charged by Banana Limited is: 4% Banana Limited provides a monthly rental allowance: 2,000 8. On April I of each year during the employment period, Apricot is granted options to buy the shares of the parent company of Banana Limited which is incorporated in the US. One option can be used to buy one share. Cost of each option: 2 Exercise price: 4 9. Banana Limited adopts MPF scheme as the recognized retirement scheme of Apricot. 10. Apricot is free to enjoy the meals (at no cost) in any hotels operated by Banana Limited. Or Apricot can choose to receive $150 per day if Apricot does not dine in the hotels. 11. Banana Limited provides child education benefits. Annual payment for each child for a year: 6,000 12. Banana Limited provides a round-trip ticket (business class) for Apricot between Hong Kong and Australia once a year. 20,000 13. Apricot is eligible for an education incentive if Apricot completes a training which is relevant to hotel management or culinary arts. annnn Monthly M 2 a Below was the information about the expenses paid by and reimbursement received by Apricot during the year of assessment 2020/2021: Items Travelling expense between home and office Expenses (S) Reimbursement/Subsidy (S) Note Travelling expense between office and office 4,500 5,000 Salary for driver 7,500 8,000 a Children education benefits 0 7,000 a, b Meal expense 200,000 24,000 a 0 100.000 Membership/subscription fee for Hong Kong a, e Amateur Chef Association 7,500 Membership/subscription fee for Australian Cricket Club 15,000 15,000 Membership/subscription fee for Hong Kong Country Club 10,000 Medical expenses 150,000 82,500 ad Expense for voluntary health insurance scheme 45,000 Expense for qualifying deferred annuity f policy 40,000 MPF contribution 40,000 B Tuition fee for master degree course in culinary management 200.000 120,000 Round trip tickets to Australia for holiday 30,000 20,000 Air-ticket to Australia for business purpose 5,000 0 i Interest expense for the first mortgage with a bank in Hong Kong 120,000 Interest expense for the second mortgage with j Banana Limited 50,000 e h During the year, Apricot purchased and exercised the options. The information was as follows: Number of options purchased: 4,000 Date of options granted: 1-Apr-20 Date of options purchased: 16-May-20 Date of options exercised: 10-Jun-20 Number of options exercised: 4,000 Date of shares sold: 4-Aug-20 Market price of share on: 1-Apr-20 $6.3 16-May-20 $8.3 10-Jun-20 $11.8 4-Aug-20 $13.9 Apricot was married for 28 years. His wife, Durian, died in February 2020. Apricot is (Durian was) a holder of Hong Kong Identity Card. Apricot has to take care of their children, parents, and grandparent. The children of Apricot were born in Hong Kong. When Apricot's wife died, some of the children were sont i Australia io ti iki var fly in parchis of April. Below was e information about the family members and the expenses contributed by Apricot for the year: 3 Relations Age Place of residence Note Durian's grandmother Durian's father Durian's stepmother Apricot's father Apricot's mother Eldest son 89 68 58 70 67 Expenses paid by Apricot ($) 90,000 50,000 50,000 k, m m n I, n i 150,000 22 Hong Kong Hong Kong Hong Kong Melbourne Melbourne Hong Kong as full time university student Melbourne as full time university student Melbourne as full time secondary school student Melbourne as full time primary school student 50,000 Eldest daughter 18 50,000 Youngest son 13 50,000 Youngest daughter 6 50,000 a b e Note: The reimbursement/subsidy was paid by Banana Limited. The driver is hired by Banana Limited for Apricot to use for any purpose. During the year, Apricot had meals (200 days for breakfast, 200 days for lunch, and 150 days for dinner) in the hotels operated by Banana Limited. The costs for breakfast, lunch, and dinners were $20, $50, and $80, respectively. The total cost of the meal in the hotels operated by Banana Limited was $26,000. However, Apricot is free to enjoy the meals (at no cost) in any hotels operated by Banana Limited. For the days when Apricot did not have the meal in the hotels operated by Banana Limited, Apricot received $150 per day. In addition, Apricot received additional subsidies of $100,000 for dining outside. d The reimbursement was paid by Cherry Insurance Limited, The voluntary health insurance scheme policy was for Apricot and his children, one scheme policy for each. The insurance scheme qualifying premium is $9,000 per person. f The qualifying annuity policy was for Apricot as sole holder and annuitant. g Of the total contribution to MPF scheme, $18,000 is for the mandatory contribution, the remaining is for tax deductible MPF voluntary contribution. h The master degree course was a course provided by an approved institution. Apricot completed the course on December 31, 2020. i The eldest son stays in Hong Kong with Apricot. During the year, Apricot was asked to go back to Australia for a business visit for 3 days. Banana Limited purchased a business class flight ticket for Apricot ($35,000). Apricot used the ticket to exchange for two tickets for economy class (one for Apricot and one for eldest son). The extra cost for the two tickets for economy class was $5,000. j Banana Limited provides Apricot with a low-interest loan of the second mortgage. If Apricot has to pay interest at market interest rate, the annual interest expense for the second mortgage should be $80,000. k The grandmother of Durian stayed in a registered residential care home. The residential fee ($40,000) was paid by Apricot. In addition to the payment for the registered residential care home, Apricot contributed $50,000 towards her maintenance. The grandmother of Durian and mother of Apricot are eligible to claim the government disability allowance of Hong Kong and Australia. m n Durian's father is also an employee of Banana Limited. Durian's stepmother is a housewife. Their financial well-being is mainly supported by Apricot. The parents of Apricot are retired. Apricot uses his own kitchenware for cooking. The depreciation allowance of the kitchenware granted by the Inland Revenue Department for the year is $7,500. Required: (a) With the assumption that Apricot would claim all the deductions and allowances which are available for Apricot, compute the salaries tax liability of Apricot for the year of assessment 2020/2021 (ignore (65 marks) provisional salaries tax, tax rebate, tax waiver, and overseas tax issues). Mr Apricot Angelfish is an Australian, born in Melbourne. Apricot is a one of the top Michelin Star chefs in the world and has been working in Hong Kong for 20 years. He is a permanent resident in Hong Kong. Apricot is now employed by Banana Limited, a company incorporated in Hong Kong, as the executive chef for a term of three years starting from April 2019 to March 2022. Banana Limited operates a number of hotels in Asia-Pacific region. Below is the summary of the terms in the employment contract: 60,000 6 $ 1. Monthly salary: 64.000 2 Monthly entertainment allowance: 56,000 3. Banana Limited provides a car for Apricot to use. Market value of car: 90,000 Resale value of car: 60,000 Monthly petrol allowance: 3,000 4. Banana Limited provides medical benefits for Apricot. Banana Limited buys a medical insurance policy from Cherry Insurance Limited. The annual premium of the medical insurance policy: 10,000 Annual medical expense coverage: Banana Limited agrees to pay one-fourth of the medical expenses which are not covered by Cherty Insurance Limited. 5 Apricot is free to join any clubs and associations. Banana Limited agrees to reimburse Apricot for the membership/subscription fee of one of the clubs and associations of the choice of Apricot. Banana Limited provides an allowance for Apricot to pay taxes for previous year of assessment: Hong Kong tax: 135,000 Australian tax: 45,000 7. Banana Limited provides a serviced apartment in one of its hotels for Apricot as accommodation deduction of salary for rent expenses: 2% Banana Limited provides Apricot with a low-interest loan of the second mortgage to buy a property in Australia. Apricot stays in the property when he is in Australia. The interest rate charged by Banana Limited is: 4% Banana Limited provides a monthly rental allowance: 2,000 8. On April I of each year during the employment period, Apricot is granted options to buy the shares of the parent company of Banana Limited which is incorporated in the US. One option can be used to buy one share. Cost of each option: 2 Exercise price: 4 9. Banana Limited adopts MPF scheme as the recognized retirement scheme of Apricot. 10. Apricot is free to enjoy the meals (at no cost) in any hotels operated by Banana Limited. Or Apricot can choose to receive $150 per day if Apricot does not dine in the hotels. 11. Banana Limited provides child education benefits. Annual payment for each child for a year: 6,000 12. Banana Limited provides a round-trip ticket (business class) for Apricot between Hong Kong and Australia once a year. 20,000 13. Apricot is eligible for an education incentive if Apricot completes a training which is relevant to hotel management or culinary arts. annnn Monthly M 2 a Below was the information about the expenses paid by and reimbursement received by Apricot during the year of assessment 2020/2021: Items Travelling expense between home and office Expenses (S) Reimbursement/Subsidy (S) Note Travelling expense between office and office 4,500 5,000 Salary for driver 7,500 8,000 a Children education benefits 0 7,000 a, b Meal expense 200,000 24,000 a 0 100.000 Membership/subscription fee for Hong Kong a, e Amateur Chef Association 7,500 Membership/subscription fee for Australian Cricket Club 15,000 15,000 Membership/subscription fee for Hong Kong Country Club 10,000 Medical expenses 150,000 82,500 ad Expense for voluntary health insurance scheme 45,000 Expense for qualifying deferred annuity f policy 40,000 MPF contribution 40,000 B Tuition fee for master degree course in culinary management 200.000 120,000 Round trip tickets to Australia for holiday 30,000 20,000 Air-ticket to Australia for business purpose 5,000 0 i Interest expense for the first mortgage with a bank in Hong Kong 120,000 Interest expense for the second mortgage with j Banana Limited 50,000 e h During the year, Apricot purchased and exercised the options. The information was as follows: Number of options purchased: 4,000 Date of options granted: 1-Apr-20 Date of options purchased: 16-May-20 Date of options exercised: 10-Jun-20 Number of options exercised: 4,000 Date of shares sold: 4-Aug-20 Market price of share on: 1-Apr-20 $6.3 16-May-20 $8.3 10-Jun-20 $11.8 4-Aug-20 $13.9 Apricot was married for 28 years. His wife, Durian, died in February 2020. Apricot is (Durian was) a holder of Hong Kong Identity Card. Apricot has to take care of their children, parents, and grandparent. The children of Apricot were born in Hong Kong. When Apricot's wife died, some of the children were sont i Australia io ti iki var fly in parchis of April. Below was e information about the family members and the expenses contributed by Apricot for the year: 3 Relations Age Place of residence Note Durian's grandmother Durian's father Durian's stepmother Apricot's father Apricot's mother Eldest son 89 68 58 70 67 Expenses paid by Apricot ($) 90,000 50,000 50,000 k, m m n I, n i 150,000 22 Hong Kong Hong Kong Hong Kong Melbourne Melbourne Hong Kong as full time university student Melbourne as full time university student Melbourne as full time secondary school student Melbourne as full time primary school student 50,000 Eldest daughter 18 50,000 Youngest son 13 50,000 Youngest daughter 6 50,000 a b e Note: The reimbursement/subsidy was paid by Banana Limited. The driver is hired by Banana Limited for Apricot to use for any purpose. During the year, Apricot had meals (200 days for breakfast, 200 days for lunch, and 150 days for dinner) in the hotels operated by Banana Limited. The costs for breakfast, lunch, and dinners were $20, $50, and $80, respectively. The total cost of the meal in the hotels operated by Banana Limited was $26,000. However, Apricot is free to enjoy the meals (at no cost) in any hotels operated by Banana Limited. For the days when Apricot did not have the meal in the hotels operated by Banana Limited, Apricot received $150 per day. In addition, Apricot received additional subsidies of $100,000 for dining outside. d The reimbursement was paid by Cherry Insurance Limited, The voluntary health insurance scheme policy was for Apricot and his children, one scheme policy for each. The insurance scheme qualifying premium is $9,000 per person. f The qualifying annuity policy was for Apricot as sole holder and annuitant. g Of the total contribution to MPF scheme, $18,000 is for the mandatory contribution, the remaining is for tax deductible MPF voluntary contribution. h The master degree course was a course provided by an approved institution. Apricot completed the course on December 31, 2020. i The eldest son stays in Hong Kong with Apricot. During the year, Apricot was asked to go back to Australia for a business visit for 3 days. Banana Limited purchased a business class flight ticket for Apricot ($35,000). Apricot used the ticket to exchange for two tickets for economy class (one for Apricot and one for eldest son). The extra cost for the two tickets for economy class was $5,000. j Banana Limited provides Apricot with a low-interest loan of the second mortgage. If Apricot has to pay interest at market interest rate, the annual interest expense for the second mortgage should be $80,000. k The grandmother of Durian stayed in a registered residential care home. The residential fee ($40,000) was paid by Apricot. In addition to the payment for the registered residential care home, Apricot contributed $50,000 towards her maintenance. The grandmother of Durian and mother of Apricot are eligible to claim the government disability allowance of Hong Kong and Australia. m n Durian's father is also an employee of Banana Limited. Durian's stepmother is a housewife. Their financial well-being is mainly supported by Apricot. The parents of Apricot are retired. Apricot uses his own kitchenware for cooking. The depreciation allowance of the kitchenware granted by the Inland Revenue Department for the year is $7,500. Required: (a) With the assumption that Apricot would claim all the deductions and allowances which are available for Apricot, compute the salaries tax liability of Apricot for the year of assessment 2020/2021 (ignore (65 marks) provisional salaries tax, tax rebate, tax waiver, and overseas tax issues)
