The Case In 2020, You joined Chan \& Chan Co, CPA, a local CPA firm which offers audit and taxation services for clients in Hong Kong. As a Partner specializing in Hong Kong taxation, you have been approached by three groups of clients this week. They came to seek your advice on Hong Kong taxation, and you need to advise them on several topics accordingly. Client 1 - Mr and Mrs Zhang Mr Zhang was employed by Global Pay Inc, a company incorporated in Portland, Oregon, USA as the Chief Technology Officer of its branch office in Hong Kong. All directors" meetings of the company were held in Portland. Mr Zhang's employment contract was negotiated and signed by him in the USA. He was born in the USA and his family has always been in Portland He was paid by the company in US dollars and his salary for the year (equivalent to HK\$2,400,000) was deposited into his account with the Sheung Wan branch of the Bank of America in Hong Kong. Mr Zhang contributed HK\$18,000 towards his MPF during the year. Mr Zhang supplied further information to you for the year ended 31 March 2022: (1) During the year, he spent 120 days working ousside Hong Kong in the company's representative office in Singapore. (2) Apart from its representative office in Singapore, Global Pay Inc, is also a participant in an equity joint venture in Hangzhou, China. He is one of the directors of this joint venture. All directors' meetings of this joint venture company have been held in Hangzhou. For this post he was paid a director fee of HK $100,000. (3) In order to help him in his job, he subscribed to an on-line magazine called 'Fintech Guru". The annual subscription fee was HKS2,000. He also purchased a Macbook computer (costing HKS20,000) which he used to do emails and doing office work. This Macbook saved him enomous amount of time, especially when in his hotel roon in Singapore and Shenzhen. At times he used the Macbook to view Netflix contents when he was off work. (4) As part of his employment package, he is entitled to participate in a share option plan established by Global Pay Inc. He was granted 533 options on 1 December 2020 (market value HK\$30 per share). He exercised the options on I March 2022 (market value HK\$25 per share) and sold all the shares on 31 March 2022 (market value HK $28 per share). The cost of the option was nil and the exercise price of the option is HKS15 per share. (5) Global Pay Ine. gave Mr Zhang the option of being remunerated with a salary of HKS100,000 per month plus accommodation benefit worth HK $100,000 per month (this would take the form of rent-free accommodation in the company's quarters in Heng Fa Chuen) or a total cash payment of HKS200,000 per month. He opted for the second option and rented a flat in Pokfulam for HK $80,000 per month. In its Employer's return, the company split Mr Zhang's remuneration into two parts: salaries HKS120,000 per month and an "accommodation allowance' of HK $80,000 per month. (6) His wife (Mrs Zhang) worked as a part-time translator in Hong Kong and eamed a salary of HKS120,000 in the year. She was employed by SCMP, a newspaper publisher carried out business in Hong Kong. She contributed 5% of her salaries to MPF in the year. (7) Mr Zhang has two children aged 22 and 23. The eldest, unmarried is a full-time student with the Chinese University of Hong Kong. The youngest, also unmarried was the full-time student with the Hang Seng University of Hong Kong until she graduated in February 2022. She then got a full-time job as Audit Trainee with PwC Hong Kong. (8) His father-in-law, aged 75 who had previously lived alone in Aberdeen, became ill and unable to 2 look after himself. On 1 December 2021, he sent his father-in-law to a nursing home (registered under the Nursery Homes and Maternity Homes Registration Ordinance) in Shumshuipo. Thereafter he paid all the nursing care and food bills amounting HK 520,000 per month. Client 2 - Mr Stanley Mr Stanley a sole proprietor carries on a trade as a clothing retailer producing accounts to 31 March each year. The retailer business is the only trade Mr Stanley carried out in Hong Kong. The trading. profit and loss account for the year ended 31 March 2022 is as follows: Additional notes to the above: (i) Replacement of utensils of $5,000 and $3,900 on a new sign for the retail shop. (ii) Sundry expenses include a subscription to a health spa for Mrs Stanley (Mr Stanley's wife) of $5,000. The balance is allowable deductible expenditure. (iii) Travel and Entertainment is comprised of Mr Stanley's car expenses $5,200, business travel of $1,200 and business entertainment of $3,500. (v) Tax Paid includes Salaries Tax of Mrs Stanley ($3,000) who is not employed by the business and Salaries Tax of Mrs Poon ( $5,000). (vi) The Inland Revenue Department have accepted that Mr Stanley used his car 75% for business purposes. (vii) Depreciation allowances for the year have been agreed as 55,500 . Mr Mok owns a block of three village houses in Fanling, which he leases to long term tenants on a fully furnished basis. During the year ended 31 March 2022: (1) His total rental income amounted to HK $400,000. (2) He also paid rates of HK $15,000, repairs of HK $35,000, management fee HK $45,000, agency fee of HKS10,000 and mortgage interest of HKS20,000. (3) Included in the rental at (1) above, was an amount from one of the tenants who vacated the flat in March 2022 owing three month's rent of HK\$45,000. (4) In addition to (1), he received in total an extra amount of HK $25,000 from his tenants from his tenants for so called 'furniture charges'. These charges related to the use of fumiture in each flat by each tenant. (2) Based on the case given, your group is required to prepare and type the following computations in a professional way: (i) Salaries Tax Computations 2021/22 for Mr Zhang and Mrs Zhang (Client 1) if they do not elect for Joint Assessment under Hong Kong Salaries Tax. ( 9 marks) (ii) Salaries Tax Computation 2021/22 for Mr Zhang and Mrs Zhang (Client 1) if they elect for Joint Assessment. (6 marks) (iii) Profits Tax Computation 2021/22 for Mr Stanley (Client 2). (10 marks) (iv) Property Tax Computation 2021/22 for Mr Mok (Client 3). (10 marks) (3) Your clients also seek advice from you, please advise them with respect to the followings: (i) Mr and Mrs Zhang (Client 1) would like to know if Mr Zhang has a Hong Kong or overseas employment. (3 marks) (ii) Mr and Mrs Zhang (Client 1) would like to understand whether they should elect for Joint Assessment for Hong Kong Salaries Tax filing. (2 marks) (ii) Mr Stanley (Client 2) would like to know the obligations of keeping records with respect to Hong Kong Profits Tax. (5 marks) (iii) Mr Mok (Client 3) wants to understand what option he has to re-open a tax assessment that has become final and conclusive. (5 marks) The Case In 2020, You joined Chan \& Chan Co, CPA, a local CPA firm which offers audit and taxation services for clients in Hong Kong. As a Partner specializing in Hong Kong taxation, you have been approached by three groups of clients this week. They came to seek your advice on Hong Kong taxation, and you need to advise them on several topics accordingly. Client 1 - Mr and Mrs Zhang Mr Zhang was employed by Global Pay Inc, a company incorporated in Portland, Oregon, USA as the Chief Technology Officer of its branch office in Hong Kong. All directors" meetings of the company were held in Portland. Mr Zhang's employment contract was negotiated and signed by him in the USA. He was born in the USA and his family has always been in Portland He was paid by the company in US dollars and his salary for the year (equivalent to HK\$2,400,000) was deposited into his account with the Sheung Wan branch of the Bank of America in Hong Kong. Mr Zhang contributed HK\$18,000 towards his MPF during the year. Mr Zhang supplied further information to you for the year ended 31 March 2022: (1) During the year, he spent 120 days working ousside Hong Kong in the company's representative office in Singapore. (2) Apart from its representative office in Singapore, Global Pay Inc, is also a participant in an equity joint venture in Hangzhou, China. He is one of the directors of this joint venture. All directors' meetings of this joint venture company have been held in Hangzhou. For this post he was paid a director fee of HK $100,000. (3) In order to help him in his job, he subscribed to an on-line magazine called 'Fintech Guru". The annual subscription fee was HKS2,000. He also purchased a Macbook computer (costing HKS20,000) which he used to do emails and doing office work. This Macbook saved him enomous amount of time, especially when in his hotel roon in Singapore and Shenzhen. At times he used the Macbook to view Netflix contents when he was off work. (4) As part of his employment package, he is entitled to participate in a share option plan established by Global Pay Inc. He was granted 533 options on 1 December 2020 (market value HK\$30 per share). He exercised the options on I March 2022 (market value HK\$25 per share) and sold all the shares on 31 March 2022 (market value HK $28 per share). The cost of the option was nil and the exercise price of the option is HKS15 per share. (5) Global Pay Ine. gave Mr Zhang the option of being remunerated with a salary of HKS100,000 per month plus accommodation benefit worth HK $100,000 per month (this would take the form of rent-free accommodation in the company's quarters in Heng Fa Chuen) or a total cash payment of HKS200,000 per month. He opted for the second option and rented a flat in Pokfulam for HK $80,000 per month. In its Employer's return, the company split Mr Zhang's remuneration into two parts: salaries HKS120,000 per month and an "accommodation allowance' of HK $80,000 per month. (6) His wife (Mrs Zhang) worked as a part-time translator in Hong Kong and eamed a salary of HKS120,000 in the year. She was employed by SCMP, a newspaper publisher carried out business in Hong Kong. She contributed 5% of her salaries to MPF in the year. (7) Mr Zhang has two children aged 22 and 23. The eldest, unmarried is a full-time student with the Chinese University of Hong Kong. The youngest, also unmarried was the full-time student with the Hang Seng University of Hong Kong until she graduated in February 2022. She then got a full-time job as Audit Trainee with PwC Hong Kong. (8) His father-in-law, aged 75 who had previously lived alone in Aberdeen, became ill and unable to 2 look after himself. On 1 December 2021, he sent his father-in-law to a nursing home (registered under the Nursery Homes and Maternity Homes Registration Ordinance) in Shumshuipo. Thereafter he paid all the nursing care and food bills amounting HK 520,000 per month. Client 2 - Mr Stanley Mr Stanley a sole proprietor carries on a trade as a clothing retailer producing accounts to 31 March each year. The retailer business is the only trade Mr Stanley carried out in Hong Kong. The trading. profit and loss account for the year ended 31 March 2022 is as follows: Additional notes to the above: (i) Replacement of utensils of $5,000 and $3,900 on a new sign for the retail shop. (ii) Sundry expenses include a subscription to a health spa for Mrs Stanley (Mr Stanley's wife) of $5,000. The balance is allowable deductible expenditure. (iii) Travel and Entertainment is comprised of Mr Stanley's car expenses $5,200, business travel of $1,200 and business entertainment of $3,500. (v) Tax Paid includes Salaries Tax of Mrs Stanley ($3,000) who is not employed by the business and Salaries Tax of Mrs Poon ( $5,000). (vi) The Inland Revenue Department have accepted that Mr Stanley used his car 75% for business purposes. (vii) Depreciation allowances for the year have been agreed as 55,500 . Mr Mok owns a block of three village houses in Fanling, which he leases to long term tenants on a fully furnished basis. During the year ended 31 March 2022: (1) His total rental income amounted to HK $400,000. (2) He also paid rates of HK $15,000, repairs of HK $35,000, management fee HK $45,000, agency fee of HKS10,000 and mortgage interest of HKS20,000. (3) Included in the rental at (1) above, was an amount from one of the tenants who vacated the flat in March 2022 owing three month's rent of HK\$45,000. (4) In addition to (1), he received in total an extra amount of HK $25,000 from his tenants from his tenants for so called 'furniture charges'. These charges related to the use of fumiture in each flat by each tenant. (2) Based on the case given, your group is required to prepare and type the following computations in a professional way: (i) Salaries Tax Computations 2021/22 for Mr Zhang and Mrs Zhang (Client 1) if they do not elect for Joint Assessment under Hong Kong Salaries Tax. ( 9 marks) (ii) Salaries Tax Computation 2021/22 for Mr Zhang and Mrs Zhang (Client 1) if they elect for Joint Assessment. (6 marks) (iii) Profits Tax Computation 2021/22 for Mr Stanley (Client 2). (10 marks) (iv) Property Tax Computation 2021/22 for Mr Mok (Client 3). (10 marks) (3) Your clients also seek advice from you, please advise them with respect to the followings: (i) Mr and Mrs Zhang (Client 1) would like to know if Mr Zhang has a Hong Kong or overseas employment. (3 marks) (ii) Mr and Mrs Zhang (Client 1) would like to understand whether they should elect for Joint Assessment for Hong Kong Salaries Tax filing. (2 marks) (ii) Mr Stanley (Client 2) would like to know the obligations of keeping records with respect to Hong Kong Profits Tax. (5 marks) (iii) Mr Mok (Client 3) wants to understand what option he has to re-open a tax assessment that has become final and conclusive