Question 2 Albert Ho is the Sales Manager of Hurricane Ltd, a company carrying on business in Hong Kong. He provided you with the following information relating to the year ended 31 March 2020: 1. His salary was $700,000 for the year. He also received a year end bonus of $80,000.
2. He received a housing allowance of $10,000 per month. He lived in his self-owned property in Lam Tin which he has purchased two years ago. He borrowed a mortgaged loan from Dah Sing Bank and paid interest of $68,000 for the year.
3. He used his own motor car for meeting elients. He received a car allowance of $6,000 per month from the employer. He incurred fuel and parking fees for a total of $80,000. The Inland Revenue Department agreed that 30% of the car was used for employment purpose. Depreciation allowance of the motor car is $40,000 for the year.
4. Albert attended a trade fair in New York in May 2019. Hurricane Ltd provided him with the air tickets and hotel accommodation for this business trip. Albert stayed behind for sightseeing before returning to Hong Kong. The costs of the air tickets and hotel charges paid by the employer were $15,000 and $10,000 (for 6 nights including 3 nights for sightseeing) respectively.
5. On 5 May 2019, he was awarded 10,000 shares unconditionally. However, he was not allowed to sell the shares within one year from the date of award. On 10 October 2019, he was granted a share option to subscribe for 50,000 shares in the company at $5 each. He paid $10,000 to acquire the option right. On 15 December 2019, he exercised the option to subscribe for these shares. These shares were sold on 6 January 2020. The market values per share on respective dates were as follows: 5 May 2019 $10 10 October 2019 $8 15 December 2019 $9 6 January 2020 $9.5
6. Albert was enrolled in the employer' 's group medical insurance scheme. Hurricane Ltd paid a premium of $8,500 for his medical cover. During the year, he obtained a medical refund of $10,500 from the insurance company.
7. Albert studied a master 's degree in marketing programme offered by a local university and paid tuition fee of $95,000 during the year. He obtained a refund of $20,000 from the Continuing Education Fund on 30 March 2020.
8. Albert was enrolled in Hurricane Ltd's MPF scheme. He made contributions of $36,000 to the scheme during the year.
9. Albert purchased voluntary health insurance scheme policies for his brother and his mother. He paid qualifying premiums of $6,000 and $11,000 respectively on 10 June 2019. He also contributed $30,000 to the tax-deductible MPF voluntary contribution account on 1 February 2020
10. During the year, Albert donated cash of $40,000 to Tung Wah Group of Hospitals.
11. Albert has a son, aged 22. He completed full-time study from The Hong Kong Polytechnic University in August 2019 and started to work as an auditor in January 2020. Albert's mother, aged 72, was residing with him throughout the year. Albert's brother, aged 48, was also residing with him. His brother was incapacitated for work due to physical disability and depending on Albert's support for his living.
Loretta works as a vice president in sales of a Hong Kong company. Recently, she was approached by a head-hunter to work for a group of companies. She would be appointed as a director and a brand manager of a company which is resident outside Hong Kong. Her remuneration will be $900,000 per year in total, which may be received in form of director's fee and salary. While she needs to travel outside Hong Kong regularly, she will also spend substantial time working in Hong Kong.
Required: (a) Prepare the Hong Kong salaries tax computation for Albert Ho for the year of assessment 2019/20 under separate taxation. You may assume that he would claim all the deductions and allowances which he is eligible. Ignore provisional tax. Show all the workings. Explanatory writing is NOT required for this part of the question. (18 marks)
(b) Explain the salaries tax treatment of the followings (NOT more than 400 words): (i) air tickets and hotel charges (note 4); (i) tuition fee (note 7); and (ii) contributions to MPF scheme (note 8). (7 marks) (c) Advise Loretta on how she may split her total remuneration from the new engagement in term of director's fee and salary in order to reduce her salaries tax liability in Hong Kong. You may ignore her tax liability outside Hong Kong. (NOT more than 400 words) (8 marks) Total: 33 marks
Question 2 4. 5. Albert Ho is the Sales Manager of Hurricane Ltd, a company carrying on business in Hong Kong. He provided you with the following information relating to the year ended 31 March 2020 1. His salary was $ 700,000 for the year. He also received a year end bonus of $80,000 2. He received a housing allowance of $10,000 per month. He lived in his self-owned property in Lam Tin which he has purchased two years ago. He borrowed a mortgaged loan from Dah Sing Bank and paid interest of $68,000 for the year. 3. He used his own motor car for meeting clients. He received a car allowance of $6,000 per month from the employer. He incurred fuel and parking fees for a total of $80,000. The Inland Revenue Department agreed that 30% of the car was used for employment purpose. Depreciation allowance of the motor car is $40.000 for the year Albert attended a trade fair in New York in May 2019. Hurricane Ltd provided him with the air tickets and hotel accommodation for this business trip. Albert stayed behind for sightseeing before returning to Hong Kong. The costs of the air tickets and hotel charges paid by the employer were $15,000 and $10,000 (for 6 nights including 3 nights for sightseeing) respectively, On 5 May 2019, he was awarded 10,000 shares unconditionally. However, he was not allowed to sell the shares within one year from the date of award. On 10 October 2019, he was granted a share option to subscribe for 50,000 shares in the company at $5 each. He paid $10,000 to acquire the option right. On 15 December 2019, he exercised the option to subscribe for these shares. These shares were sold on 6 January 2020. The market values per share on respective dates were as follows: 5 May 2019 $10 10 October 2019 $8 15 December 2019 $9 6 January 2020 $9.5 Albert was enrolled in the employer's group medical insurance scheme. Hurricane Ltd paid a premium of $8.500 for his medical cover. During the year, he obtained a medical refund of $10,500 from the insurance company 7. Albert studied a master's degree in marketing programme offered by a local university and paid tuition fee of $95,000 during the year. He obtained a refund of $20,000 from the Continuing Education Fund on 30 March 2020. Albert was enrolled in Hurricane Ltd's MPF scheme. He made contributions of S36,000 to the scheme during the year. Albert purchased voluntary health insurance scheme policies for his brother and his mother. He paid qualifying premiums of $6,000 and $11,000 respectively on 10 June 2019. He also contributed $30,000 to the tax-deductible MPF voluntary contribution account on 1 February 2020 10. During the year, Albert donated cash of $40,000 to Tung Wah Group of Hospitals. 6. 8. 9. 11. Albert has a son, aged 22. He completed full-time study from The Hong Kong Polytechnic University in August 2019 and started to work as an auditor in January 2020. Albert's mother, aged 72, was residing with him throughout the year. Albert's brother, aged 48, was also residing with him. His brother was incapacitated for work due to physical disability and depending on Albert's support for his living Loretta works as a vice president in sales of a Hong Kong company. Recently, she was approached by a head-hunter to work for a group of companies. She would be appointed as a director and a brand manager of a company which is resident outside Hong Kong. Her remuneration will be $900,000 per year in total, which may be received in form of director's fee and salary. While she needs to travel outside Hong Kong regularly, she will also spend substantial time working in Hong Kong, Required: (a) Prepare the Hong Kong salaries tax computation for Albert Ho for the year of assessment 2019/20 under separate taxation. You may assume that he would claim all the deductions and allowances which he is eligible. Ignore provisional tax. Show all the workings. Explanatory writing is NOT required for this part of the question. (18 marks) (b) Explain the salaries tax treatment of the followings (NOT more than 400 words): i) air tickets and hotel charges (note 4); (ii) tuition fee (note 7); and (111) contributions to MPF scheme (note 8). (7 marks) (c) Advise Loretta on how she may split her total remuneration from the new engagement in term of director's fee and salary in order to reduce her salaries tax liability in Hong Kong. You may ignore her tax liability outside Hong Kong. (NOT more than 400 words) (8 marks) Total: 33 marks Question 2 4. 5. Albert Ho is the Sales Manager of Hurricane Ltd, a company carrying on business in Hong Kong. He provided you with the following information relating to the year ended 31 March 2020 1. His salary was $ 700,000 for the year. He also received a year end bonus of $80,000 2. He received a housing allowance of $10,000 per month. He lived in his self-owned property in Lam Tin which he has purchased two years ago. He borrowed a mortgaged loan from Dah Sing Bank and paid interest of $68,000 for the year. 3. He used his own motor car for meeting clients. He received a car allowance of $6,000 per month from the employer. He incurred fuel and parking fees for a total of $80,000. The Inland Revenue Department agreed that 30% of the car was used for employment purpose. Depreciation allowance of the motor car is $40.000 for the year Albert attended a trade fair in New York in May 2019. Hurricane Ltd provided him with the air tickets and hotel accommodation for this business trip. Albert stayed behind for sightseeing before returning to Hong Kong. The costs of the air tickets and hotel charges paid by the employer were $15,000 and $10,000 (for 6 nights including 3 nights for sightseeing) respectively, On 5 May 2019, he was awarded 10,000 shares unconditionally. However, he was not allowed to sell the shares within one year from the date of award. On 10 October 2019, he was granted a share option to subscribe for 50,000 shares in the company at $5 each. He paid $10,000 to acquire the option right. On 15 December 2019, he exercised the option to subscribe for these shares. These shares were sold on 6 January 2020. The market values per share on respective dates were as follows: 5 May 2019 $10 10 October 2019 $8 15 December 2019 $9 6 January 2020 $9.5 Albert was enrolled in the employer's group medical insurance scheme. Hurricane Ltd paid a premium of $8.500 for his medical cover. During the year, he obtained a medical refund of $10,500 from the insurance company 7. Albert studied a master's degree in marketing programme offered by a local university and paid tuition fee of $95,000 during the year. He obtained a refund of $20,000 from the Continuing Education Fund on 30 March 2020. Albert was enrolled in Hurricane Ltd's MPF scheme. He made contributions of S36,000 to the scheme during the year. Albert purchased voluntary health insurance scheme policies for his brother and his mother. He paid qualifying premiums of $6,000 and $11,000 respectively on 10 June 2019. He also contributed $30,000 to the tax-deductible MPF voluntary contribution account on 1 February 2020 10. During the year, Albert donated cash of $40,000 to Tung Wah Group of Hospitals. 6. 8. 9. 11. Albert has a son, aged 22. He completed full-time study from The Hong Kong Polytechnic University in August 2019 and started to work as an auditor in January 2020. Albert's mother, aged 72, was residing with him throughout the year. Albert's brother, aged 48, was also residing with him. His brother was incapacitated for work due to physical disability and depending on Albert's support for his living Loretta works as a vice president in sales of a Hong Kong company. Recently, she was approached by a head-hunter to work for a group of companies. She would be appointed as a director and a brand manager of a company which is resident outside Hong Kong. Her remuneration will be $900,000 per year in total, which may be received in form of director's fee and salary. While she needs to travel outside Hong Kong regularly, she will also spend substantial time working in Hong Kong, Required: (a) Prepare the Hong Kong salaries tax computation for Albert Ho for the year of assessment 2019/20 under separate taxation. You may assume that he would claim all the deductions and allowances which he is eligible. Ignore provisional tax. Show all the workings. Explanatory writing is NOT required for this part of the question. (18 marks) (b) Explain the salaries tax treatment of the followings (NOT more than 400 words): i) air tickets and hotel charges (note 4); (ii) tuition fee (note 7); and (111) contributions to MPF scheme (note 8). (7 marks) (c) Advise Loretta on how she may split her total remuneration from the new engagement in term of director's fee and salary in order to reduce her salaries tax liability in Hong Kong. You may ignore her tax liability outside Hong Kong. (NOT more than 400 words) (8 marks) Total: 33 marks
