Year of assessment 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 15% 15% 15% 15% 15% 15% Standard Rate (Salaries tax, property tax and personal assessment) 2% 2% 2% 2% Progressive Rates Upon the first $40,000 Upon the first $45,000 Upon the first $50,000 2% 2% 7% 7% 7% 7% Upon the next $40,000 Upon the next $45,000 Upon the next $50,000 7% 6% 12% 12% 12% 12% Upon the next $40.000 Upon the next $45,000 Upon the next $50,000 12% 10% Upon the next $50,000 14% Upon the remainder 17% 17% 17% 17% 17% 17% 16.5% 16.5% 16.5% 16.5% 16.5% 16.5% Profits tax - Corporation Year of assessment 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Personal Allowances Basic Married person's Child - 1st to 9th (each) For each child born during the year, the Child Allowance will be increased by $ 120,000 240,000 70,000 70,000 $ 120,000 240,000 70,000 70,000 $ 120,000 240,000 100,000 100,000 $ 132,000 264,000 100,000 100,000 $ 132,000 264,000 100,000 100,000 $ 132,000 264.000 120,000 120,000 Dependent parent grandparent (each) Basic Additional 38,000 38,000 40,000 40,000 40,000 40,000 46,000 46,000 46,000 46,000 50.000 50,000 Dependent parent grandparent (each aged 55-59) Basic Additional 19,000 19,000 20,000 20,000 20,000 20,000 23,000 23,000 23,000 23,000 25,000 25,000 33,000 33,000 33,000 33,000 37,500 37,500 Dependent brother/sister (each) Disabled dependent (each) 66,000 66,000 66,000 66,000 75,000 75,000 Deductions $ s $ S $ $ 76,000 80,000 80,000 92,000 92,000 100,000 80,000 80,000 80,000 80,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 Elderly residential care expenses (maximum) Self-education expenses (maximum) Home loan interest (maximum) Contributions to recognised retirement schemes (maximum) Approved charitable donations 15,000 17,500 18,000 18,000 18,000 18,000 35% 35% 35% 35% 35% 35% 2013/14 2014/15 | 2015/16 2016/17 2017/18 2018/19 60% 60% 60% 60% 60% 60% Year of assessment Depreciation Allowances Plant and Machinery - Initial Allowance Industrial Building - Initial Allowance Annual Allowance Commercial Building Allowance 20% 20% 20% 20% 20% 20% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% a Dickson Smith, a Canadian, was appointed as the Chief Executive Officer of Forever (HK) Ltd (Forever), a company carrying on business in Hong Kong, on 1 April 2017. The following information is available for the year ended 31 March 2018: 1. Dickson received a monthly salary of $100,000. 2. Forever provided Dickson with a car and a driver. The car was rented by Forever at an annual rental of $36,000. The driver was hired by Forever at $3,000 per month. Dickson received a total reimbursement of $3,600 from Forever to cover the petrol costs of the car for the year. 3. For the month of April 2017, Dickson was given a cash allowance of $20,000 to cover his accommodation costs. From 1 May 2017 onwards, he was provided with a house owned by Forever, and 5% was deducted from his monthly salary. Forever also employed an amah for Dickson at a cost of $2,000 per month and paid Forever's utilities bills for the house of $12,000 for the year. 4. Dickson made a gain on share option of $249,000. 5. Dickson is studying for a DBA degree at the University of Hong Kong. During the year, he paid a tuition fee of $85,000 and books for the course of $4,000. 6. Dickson purchased a laptop computer for $10,000 and used it both for work and private purposes. 7. Dickson's wife is a housewife. They have two sons, aged 20 and 13. The elder son is attending a full-time bachelor degree course at a UK university. 8. Dickson's mother, aged 68, lives in Guangdong. His mother has a Hong Kong identity card but seldom travels to Hong Kong. 9. Dickson contributed $19,000 to the MPF. Required: (a) Prepare a Salaries Tax Computation to calculate Hong Kong salaries tax payable by Dickson, if any, for the year of assessment 2017/18. Ignore provisional salaries tax and tax rebate or reduction, if any. (12 marks) (6) Explain the tax treatment of the above items (2). (5) and (6). (3 marks) Year of assessment 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 15% 15% 15% 15% 15% 15% Standard Rate (Salaries tax, property tax and personal assessment) 2% 2% 2% 2% Progressive Rates Upon the first $40,000 Upon the first $45,000 Upon the first $50,000 2% 2% 7% 7% 7% 7% Upon the next $40,000 Upon the next $45,000 Upon the next $50,000 7% 6% 12% 12% 12% 12% Upon the next $40.000 Upon the next $45,000 Upon the next $50,000 12% 10% Upon the next $50,000 14% Upon the remainder 17% 17% 17% 17% 17% 17% 16.5% 16.5% 16.5% 16.5% 16.5% 16.5% Profits tax - Corporation Year of assessment 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 Personal Allowances Basic Married person's Child - 1st to 9th (each) For each child born during the year, the Child Allowance will be increased by $ 120,000 240,000 70,000 70,000 $ 120,000 240,000 70,000 70,000 $ 120,000 240,000 100,000 100,000 $ 132,000 264,000 100,000 100,000 $ 132,000 264,000 100,000 100,000 $ 132,000 264.000 120,000 120,000 Dependent parent grandparent (each) Basic Additional 38,000 38,000 40,000 40,000 40,000 40,000 46,000 46,000 46,000 46,000 50.000 50,000 Dependent parent grandparent (each aged 55-59) Basic Additional 19,000 19,000 20,000 20,000 20,000 20,000 23,000 23,000 23,000 23,000 25,000 25,000 33,000 33,000 33,000 33,000 37,500 37,500 Dependent brother/sister (each) Disabled dependent (each) 66,000 66,000 66,000 66,000 75,000 75,000 Deductions $ s $ S $ $ 76,000 80,000 80,000 92,000 92,000 100,000 80,000 80,000 80,000 80,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 Elderly residential care expenses (maximum) Self-education expenses (maximum) Home loan interest (maximum) Contributions to recognised retirement schemes (maximum) Approved charitable donations 15,000 17,500 18,000 18,000 18,000 18,000 35% 35% 35% 35% 35% 35% 2013/14 2014/15 | 2015/16 2016/17 2017/18 2018/19 60% 60% 60% 60% 60% 60% Year of assessment Depreciation Allowances Plant and Machinery - Initial Allowance Industrial Building - Initial Allowance Annual Allowance Commercial Building Allowance 20% 20% 20% 20% 20% 20% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 4% a Dickson Smith, a Canadian, was appointed as the Chief Executive Officer of Forever (HK) Ltd (Forever), a company carrying on business in Hong Kong, on 1 April 2017. The following information is available for the year ended 31 March 2018: 1. Dickson received a monthly salary of $100,000. 2. Forever provided Dickson with a car and a driver. The car was rented by Forever at an annual rental of $36,000. The driver was hired by Forever at $3,000 per month. Dickson received a total reimbursement of $3,600 from Forever to cover the petrol costs of the car for the year. 3. For the month of April 2017, Dickson was given a cash allowance of $20,000 to cover his accommodation costs. From 1 May 2017 onwards, he was provided with a house owned by Forever, and 5% was deducted from his monthly salary. Forever also employed an amah for Dickson at a cost of $2,000 per month and paid Forever's utilities bills for the house of $12,000 for the year. 4. Dickson made a gain on share option of $249,000. 5. Dickson is studying for a DBA degree at the University of Hong Kong. During the year, he paid a tuition fee of $85,000 and books for the course of $4,000. 6. Dickson purchased a laptop computer for $10,000 and used it both for work and private purposes. 7. Dickson's wife is a housewife. They have two sons, aged 20 and 13. The elder son is attending a full-time bachelor degree course at a UK university. 8. Dickson's mother, aged 68, lives in Guangdong. His mother has a Hong Kong identity card but seldom travels to Hong Kong. 9. Dickson contributed $19,000 to the MPF. Required: (a) Prepare a Salaries Tax Computation to calculate Hong Kong salaries tax payable by Dickson, if any, for the year of assessment 2017/18. Ignore provisional salaries tax and tax rebate or reduction, if any. (12 marks) (6) Explain the tax treatment of the above items (2). (5) and (6)