The following information is about Mr Riley for the year of assessment 2017/18:

1. Mr. Riley is a US citizen who joined a Hong Kong incorporated company Doffy Toys Ltd (the company) as a Sales and Marketing Director on 1 July 2017. Mr Riley made a trip to Hong Kong in March 2017 to attend interviews and negotiate employment contract with Doffy Toys Ltd. The employment contract with Doffy Toys Ltd was signed in May 2017.

2. Mr Riley earns monthly salary of $100,000 per month which is paid to Mr Riley’s bank account in Hong Kong. In addition, he is also provided accommodation of a 2 bedroom apartment in North Point by the company. Mr Riley has to pay monthly rent of $3,000 to the company.

3. On 1 September, 2017, Mr. Riley was given an option by his employer to purchase 10,000 shares at $4 each. The option was granted without consideration and the exercise period of the option is three years commencing 1 December 2017. Mr Riley sold half of his option right for $50,000 on 15 December 2017. He then exercised the remaining half of his option (i.e. 5,000 shares) on 15 January 2018 when the share price was $18.

4. Commencing December 2017, Mr. Riley receives a monthly director fee of $4,000 from Doffy Toys Ltd’s associated company in Shanghai. The management of this associated company is in Shanghai.

5. Mr. Riley donated cash of $20,000 to the Community Chest.

6. Mr. Riley has to support his parents in US and pay a monthly fee of US$ 6,000 to an elderly home in Seattle. Both of his parents are over 65 years old. (US$1 = HK$ 7.8)

7. Mr. Riley has contributed $5,000 per month to a Mandatory Provident Fund scheme.

8. The company has provided a domestic helper to Mr. Riley at monthly salary of $5,000 per month and the employment contract was signed between the domestic helper and Doffy Toys Ltd.

Required:

Determine the locality of Mr. Riley’s employment with reference to Inland Revenue Department’s Departmental Interpretation and Practice note 10 (Revised) “The charge to Salaries tax”.

Profits tax rate
Corporation	16.5%
Unincorporated business	15.0%
Salaries tax progressive rate
First $1 - $45,000	2%
$45,001 - $90,000	7%
$90,001-$135,000	12%
$135,001 and above	17%
Standard rate	15%
Personal allowances
	$
Basic allowance	132,000
Married person’s allowance	264,000
Child allowance:
First to ninth child (each)	100,000
Additional allowance in the year of birth (each)	100,000
Dependent parent allowance – basic	46,000
- additional	46,000
Dependent parent allowance (aged 55-59) - basic	23,000
- additional	23,000

Deductions
Home loan interest	100,000
Contributions to recognized retirement scheme	18,000
Approved charitable donations ceiling	35%
75% of salaries tax, profits tax or tax under personal assessment will be waived, subject to the maximum of $20,000.