Question 3 Mr. and Mrs. Au purchased their first property in Pokfulam Hong Kong, in joint names, on 12 October 2017 at HK$15 million. This residential flat was rented out at HK$35,000 per month to their tenant, Mr. Chan, from 15 November 2017 to 14 November 2019. The couple borrowed a mortgage loan to purchase the flat and paid mortgage interest in the sum of HK$120,000 during the year ended 31 March 2019. Mr. and Mrs. Au recently sold their only property in Pokfulam to an unrelated person, Mr. Zhang, as introduced by a property agent at HK$15.5 million. Mr. Zhang is not a Hong Kong permanent resident ("non-HKPR"). The date of the Sale and Purchase Agreement was 9 March 2020, and the Deed of Assignment was signed on 5 May 2020. Additional Information: Mr. and Mrs. Au are both Hong Kong permanent residents ("HKPRs") and they have a son of two years old. The family lives in a rented property in Wanchai, Hong Kong. Mr. Au has a sole proprietorship business in Hong Kong which made a profit of about HK$350,000, while his share of loss in a Hong Kong partnership business was about HK$90,000 in the year of assessment 2018/19. Mrs. Au has a part-time job in a local trading firm earning about HK$8,000 each month during the year ended 31 March 2019. Required: (a) Compute the amount of stamp duty chargeable under: (i) Head 1(1A) of the Stamp Duty Ordinance ("SDO") upon the purchase of the Pokfulam property by Mr. and Mrs. Au on 12 October 2017. (ii) Head 1(2) of the SDO in respect of the Pokfulam property tenancy for the two years from 15 November 2017 to 14 November 2019. (Show the detailed steps of your computations in this part (a). Explanatory notes writing is NOT required.) (2 marks) (b) Based on the information provided regarding the sale of the Pokfulam property to Mr. Zhang, determine: (i) the applicable stamp duty rate under Head 1(1A) of the SDO on this transaction. Briefly explain your answer. (ii) whether Mr. Zhang is subject to Buyer's Stamp Duty ("BSD") under the SDO. If yes, state the applicable BSD rate with brief explanation. If no, briefly explain your answer. (iii) whether this transaction is subject to Special Stamp Duty ("SSD") under the SDO. If yes, state the applicable SSD rate with brief explanation. If no, briefly explain your answer. (Computations are not required in your answers to this part (b).) (3 marks) (c) Is it advantageous for Mr. and Mrs. Au to elect Personal Assessment in the year of assessment 2018/19? Discuss and explain. (Computations are not required in your answers to this part (c).) (6 marks) (Total: 11 marks) --- End of Paper --- Page 9 of 9
