Question 4 (15 marks) Roy is a resident in Singapore who came to Hong Kong in March 2018 for holiday. He was introduced by a HK property agent to visit a residential property in Tai Koo Shing. The property was owned by a Hong Kong company, Blue Ltd, which is wholly owned by Mr. Chan. After consulting with Frankie, Roys cousin, Roy acquired the property in his own name in April 2018 in HK$30 million. He settled 70% of the acquisition cost by cash and financed the balance with a 1-year loan from a bank. After the acquisition, Roy returned to Singapore and placed the property for sale with a few HK property agents for HK$33 million, but was unsuccessful in the sale. In June 2018, Roy let Frankie use the property temporarily. In February 2019, Roy found the buyer and sold the property, making a profit of HK$3 million. Roy wondered whether the HK$3 million profit on disposal of the property would be subject to Hong Kong tax or not.

Required: (a) Comment on the difference in stamp duty implications by comparing Roys acquisition of the property in his own name; with the alternative of acquiring the shares in Blue Ltd. (Note: Calculation of the amount of stamp duty payable is not required). (7 marks)

(b) Explain whether the gain on disposal of Roys property in February 2019 is subject to Hong Kong tax. (8 marks) [Total for Question 4: 15 marks]