TAX RATES AND ALLOWANCES The following tax rates and allowances for 2020/21 are to be used in answering the questions: Tax rates: Standard Rate 15% Progressive Rates First $50,000 Next $50,000 Next $50,000 Next $50,000 Remainder 2% 6% 10% 14% 17% Personal Allowances: HK$ 132,000 264,000 120,000 120,000 50,000 25,000 Basic allowance Married person's allowance Child allowance - 1st to 9th child - newborn child Dependent parent/grandparent allowance Aged 60 or above or subject to other criteria Ages 55 to 59 not eligible for disability allowance Additional dependent parent/grandparent allowance Aged 60 or above or subject to other criteria Ages 55 to 59 not eligible for disability allowance Dependent brother/sister allowance Disabled dependent allowance Personal Disability Allowance Single Parent allowance Deductions (Maximum): 50,000 25,000 37,500 75,000 75,000 132,000 HK$ Home Loan Interest Elderly Residential Care Expenses Mandatory Contribution to MPF/MPF-exempted retirement scheme Self-education Expenses Qualifying Premiums paid under Voluntary Health Insurance Premiums (VHIS) Qualifying Annuity Premiums and Tax Deductible MPF Voluntary Contributions Approved Charitable Donations 100,000 100,000 18,000 100,000 8,000 60,000 35% 1 Questions 3 (30 marks) Mr. Chan and Mrs. Chan are Hong Kong residents living in Hong Kong for years with Mrs. Chan's mother who is 65 years old. Mr. Chan's father who is 68 years old is living with Mr. Chan's brother, but Mr. Chan paid him $4,000 per month and agreed with his brother that Mr. Chan would claim the dependent parent allowance. Mrs. Chan is a chief accountant while Mr. Chan is operating interior design and renovation business in Hong Kong. Mrs. Chan gave birth to a new boy on 5 March 2020. For the years of assessment 2019/20 and 2020/21, each of them elected to be personally assessed. The following information are related to the years of assessment 2019/20 and 2020/21. 2019/20 $ 2020/21 $ Mr. Chan 1. Agreed loss by the assessor of Inland Revenue Department. The business was ceased in 2020/21 2. Rental income from / Profit from selling the property in Lohas Park. (300,000 204,000 3,000,000 4 3. Mortgage loan interest paid in respect of the property in Lohas Park. 75,412 5,860 40,000 11,000 4,000 7,000 12,000 4,000 7,500 60,000 60,000 4. Rates relating to property in Lohas Park paid by Mr. Chan. 5. Voluntary contribution to a Tax deductible MPF account (TVC) 6. Health insurance policies under voluntary health insurance scheme (VHIS) policies were purchased for the following people: a) His father b) His brother c) Himself 7. AQDAP with Mr. Chan as the policy holder was purchased for the benefits of Mrs. Chan who was the sole annuitant Mrs. Chan 8. Salaries 9. Bonus 10. Net assessable value from a carpark 11. Mortgage loan interest paid in respect of the carpark. 12. Voluntary contribution to a Tax deductible MPF account (TVC) 13. Donation made to Community Chest 14. Mrs. Chan and her sister together bought a VHIS policy for their mother paying premiums of $10,000 in the proportion of 6 to 4. 720,000 720,000 10,000 22,400 30,000 20,000 40,000 120,000 6,000 6,000 Required: (a) Compute the tax payable of Mr. Chan and Mrs. Chan for the year of assessment 2019/20. (13 marks) (b) Compute the tax payable of Mrs. Chan (and Mr. Chan if necessary) for the year of assessment 2020/21. (13 marks) (c) In respect of item 14, explain with support from relevant section and/or DIPN the VHIS policy premium you have included in the deduction from the assessable income. (4 marks) (Ignore provisional salaries tax for both years of assessment). TAX RATES AND ALLOWANCES The following tax rates and allowances for 2020/21 are to be used in answering the questions: Tax rates: Standard Rate 15% Progressive Rates First $50,000 Next $50,000 Next $50,000 Next $50,000 Remainder 2% 6% 10% 14% 17% Personal Allowances: HK$ 132,000 264,000 120,000 120,000 50,000 25,000 Basic allowance Married person's allowance Child allowance - 1st to 9th child - newborn child Dependent parent/grandparent allowance Aged 60 or above or subject to other criteria Ages 55 to 59 not eligible for disability allowance Additional dependent parent/grandparent allowance Aged 60 or above or subject to other criteria Ages 55 to 59 not eligible for disability allowance Dependent brother/sister allowance Disabled dependent allowance Personal Disability Allowance Single Parent allowance Deductions (Maximum): 50,000 25,000 37,500 75,000 75,000 132,000 HK$ Home Loan Interest Elderly Residential Care Expenses Mandatory Contribution to MPF/MPF-exempted retirement scheme Self-education Expenses Qualifying Premiums paid under Voluntary Health Insurance Premiums (VHIS) Qualifying Annuity Premiums and Tax Deductible MPF Voluntary Contributions Approved Charitable Donations 100,000 100,000 18,000 100,000 8,000 60,000 35% 1 Questions 3 (30 marks) Mr. Chan and Mrs. Chan are Hong Kong residents living in Hong Kong for years with Mrs. Chan's mother who is 65 years old. Mr. Chan's father who is 68 years old is living with Mr. Chan's brother, but Mr. Chan paid him $4,000 per month and agreed with his brother that Mr. Chan would claim the dependent parent allowance. Mrs. Chan is a chief accountant while Mr. Chan is operating interior design and renovation business in Hong Kong. Mrs. Chan gave birth to a new boy on 5 March 2020. For the years of assessment 2019/20 and 2020/21, each of them elected to be personally assessed. The following information are related to the years of assessment 2019/20 and 2020/21. 2019/20 $ 2020/21 $ Mr. Chan 1. Agreed loss by the assessor of Inland Revenue Department. The business was ceased in 2020/21 2. Rental income from / Profit from selling the property in Lohas Park. (300,000 204,000 3,000,000 4 3. Mortgage loan interest paid in respect of the property in Lohas Park. 75,412 5,860 40,000 11,000 4,000 7,000 12,000 4,000 7,500 60,000 60,000 4. Rates relating to property in Lohas Park paid by Mr. Chan. 5. Voluntary contribution to a Tax deductible MPF account (TVC) 6. Health insurance policies under voluntary health insurance scheme (VHIS) policies were purchased for the following people: a) His father b) His brother c) Himself 7. AQDAP with Mr. Chan as the policy holder was purchased for the benefits of Mrs. Chan who was the sole annuitant Mrs. Chan 8. Salaries 9. Bonus 10. Net assessable value from a carpark 11. Mortgage loan interest paid in respect of the carpark. 12. Voluntary contribution to a Tax deductible MPF account (TVC) 13. Donation made to Community Chest 14. Mrs. Chan and her sister together bought a VHIS policy for their mother paying premiums of $10,000 in the proportion of 6 to 4. 720,000 720,000 10,000 22,400 30,000 20,000 40,000 120,000 6,000 6,000 Required: (a) Compute the tax payable of Mr. Chan and Mrs. Chan for the year of assessment 2019/20. (13 marks) (b) Compute the tax payable of Mrs. Chan (and Mr. Chan if necessary) for the year of assessment 2020/21. (13 marks) (c) In respect of item 14, explain with support from relevant section and/or DIPN the VHIS policy premium you have included in the deduction from the assessable income. (4 marks) (Ignore provisional salaries tax for both years of assessment)