You are a tax consultant for XYZ Company. You have been retained by a UK Agency, AFLOB , that operates extensively within Asia. The Client (the UK Agency) has previously been organized with Country Directors being based in London. A decision has been made to relocate them and their Assistant Directors into the key markets (they will personally move to work and live in the Country they Manage operations for). The Countrys being:JapanHonk KongNorth KoreaIn order to ensure all Directors and Assistant Directors are treated fairly the AFLOB will provide fully furnished accommodation and pay the staff a cost of living adjustment based on 2 factors. The cost of living, and local taxation paid.The cost of living adjustment required is being provided by another consultant. XYZ(You)have been commissioned to provide information on the tax payableby each Director in their respective Country posting in order that AFLOB can adjust the remuneration package for each Director individually.The salary for Directors is $200,000 pa , and Assistant Directors $150,000 paThe Directors Information is as follows1.Peter Gabriel , Director North Korea, British Citizen2.Bruce Springsteen, Assistant Director North Korea, AmericanCitizen3.Tony Banks, Director Japan, British Citizen4.Dianna Ross, Assistant Director Japan, American Citizen5.Leona Lewis, Director Hong Kong, British Citizen6.Mike Rutherford, Assistant Director Hong Kong, British Citizen.All the executives have decided to have half their salary paid into the overseas Country bank Account and half in a UK bank account, but have all of the cost of living allowance sent to them overseas.The Directors will return to the UK 4 times each year (taking 5 days each trip) for management meetings. Assistant Directors will return once each year spending 5 days.You are required to write a report to the CEO of AFLOB explaining the annual tax liability for each of the 6 Directors (this should include how you calculated the liability, not just the final amount). (This report should be less than 2,000 words and contain an executive summary.As is common in Consultancy contracts, the client may not know how much information you need. You are free to ask further questions as instructed in this Case study.

2Your Research Department has found the following to assist you(rates created for this Case study only)Dear Tax Consultant,You asked us to research information on personal taxation for the followingCountries.UK, USA, Japan, Hong Kong, North Korea. We have been able to determine the following:Double taxation agreements have been signed by both the UK and USA with all the researched Countries except North KoreaUKs Income tax rules(for this exercise only)Income tax is payable by Tax residents Personal allowances are the equivalent of $20,000 pa, The first $40,000 of Taxable income (after personal allowance) is taxed at 20%, income after that at 30%.For Income originating overseas a further $50,000 personal overseas income allowance is available (in addition to the $20,000 allowance)A cost of living hardship payment for employees sent to cultural different locations can be paid tax free up to a maximum of $50,000 per annumTax residency for the UK is calculated by spending 183 days or more in the UK. UK tax residentscan declare they have left the UK for tax purposesby submitting a form provided by the tax Authorities. If the departure date is less than 182 days after the beginning of the tax year (April 5th) any tax paid will be refunded to the taxpayer.After leaving the UK tax residence, taxpayersare not allowed to spend more than 90days in the UK in any year. This is calculated by an average over a 3 years period after they leave the tax regimeUK taxpayers who pay tax overseas( whether a DTT agreement existsor not)can claim an allowance or a deduction against tax payable in the UKNorth KoreasIncome tax rules(for this exercise only)Tax is payable by residents on all worldwide incomeThe tax rate is 40% there are no personal allowancesResidents are classed as anyone residing in the Country for more than 30 days in any one yearNationality is irrelevantUSAs Income tax rules(for this exercise only)Income tax is payable by Tax residents and

3Income tax is payable by US Citizens on all income earned worldwide, however USAcitizens who are overseas residents are given an overseas earned income exemption of $100,000Personal allowancesfor USA tax residents is $12,000 paThe first $40,000 of Taxable income (after personal allowance) is taxed at 20%, income after that at 30%.A cost of living hardship payment for employees sentto cultural different locations can be paid tax free up to a maximum of $50,000 per annumTax residency is established by spending a 183 days or more in any fiscal yearin the USAUSA citizens working in Countries with a DTT(only) can claiman allowance for overseas tax paid.Hong Kong Income tax rules (for this exercise only)Income tax is payable by Tax residents Onlyincomeearned in Hong Kongis taxable, further relief is given for whole days spent on business outside of Hong Kong for Regional HQ OperationsPersonal allowances are the equivalent of $100,000 pa, income after that is taxed at 10%.Cost of living hardship paymentsfor employees sent to cultural different locationsis not classed as taxableincomeTax residency is established by spending 180daysor more in Hong kong during afiscal year, or by spending 300 days or more over a two year period.Japans Income tax rules (for this exercise only)Income tax is payable by Tax residents Income tax is payable by tax residents only on funds (whether these are for salary or cost of living) paid into a Japanese bank account, funds not transferred into Japan are not taxablePersonal allowances are the equivalentof $30,000 pa, income after that is taxable at 30%.Tax residency is established by spending an aggregate total of more than183 days in Japan in any fiscal year.