tax_ppt

HK TAXATION Unit 5 – Salaries Tax(3)

Question 14Priscilla CHAN 2009054389Carly CHUNG 2009532135Kevin LI 2009277981Sharon YAU 2009557800Sindy YIU 2009149445

The Scenario

Mr Chinga PRC ResidentEmployed as a sales manager by Wang Laboratories Ltd in HK

Y/A 2009/10

(1)

IROS8(1)(a)

HK-sourced employmentService in HKNot visiting or visiting > 60 days

Fully taxable

Key Issue (1)Annual Salary of $240,000 from Wang Laboratories Ltd in HK

Application of IROHK-sourced employment Service in HK Not visiting or visiting > 60 days

Fully taxable

Presentation

Salary $60,000 $120,000 $60,000Meal Allowance $3,000Reimbursement for gas & utilities $3,000Housing Subsidy $60,000Outstanding Performance Award $1,250 $2,500 $1,250Refund on annual subscription $375 $750 $375Rental Value: 8%($64,625-$10,000X12X60%-$21,600X(3/12)X60%) $4,790 - - 10%($126,250-$10,000(6/12)x60%) - $2,677 -Share Option $435 $870 $435Assessable Income $69,850 $129,797 $122,060

(2),(3)

IROS9(1)(b)

Place of residence provided by ERER paid all the rent

rental value taxableS9(2)(a)

place of residence be a hotel2 rooms

rental value be 8% x (AI – outgoing and expense- DA)

IRO

S9(1)(a)Income from employment includes Wages, salaries, bonuses, leave pay, fees, commissions, gratuities, perquisites or allowance

taxable

Key Issue (2&3)

1/4/09 – 30/6/09 [3months]

2 hotel rooms providedMeal All’ce $1,000/month

Application of IROS9(1)(b)

Place of residence provided by ER ER paid all the rent rental value taxable

S9(2)place of residence is hotel 2 rooms

rental value be 8% x (AI – outgoing and expense- DA)

Application of IRO

S9(1)(a)Income from employment includes Wages, salaries, bonuses, leave pay, fees, commissions, gratuities, perquisites or allowance

taxable

Presentation

Salary $60,000 $120,000 $60,000Meal Allowance $3,000Reimbursement for gas & utilities $3,000Housing Subsidy $60,000Outstanding Performance Award $1,250 $2,500 $1,250Refund on annual subscription $375 $750 $375Rental Value: 8%($64,625-$10,000X12X60%-$21,600X(3/12)X60%) $4,790 - - 10%($126,250-$10,000(6/12)x60%) - $2,677 -Share Option $435 $870 $435Assessable Income $69,850 $129,797 $122,060

IROS(9)(1)(c)

Place of residence provided by ERER paid part of the rent

(rental value – rent borne by EE) taxable

S9(2)Rental value = 10% x (AI – outgoing expenses-DA)

IROS(9)(1)(a)

Income from employment includes Wages, salaries, bonuses, leave pay, fees, commissions, gratuities, perquisites or allowance

Expense AllowanceDischarge of ER’s own liability OR Reimbursement of deductible expenses

taxable

Key Issue (2&3)

1/7/09 – 31/12/09 [3months]

FlatEE paid rent, rate, mgt fee totaling $21,500/monthER reimbursed $20,000/month

Application of IRO

S(9)(1)(c)Place of residence provided by ER ER paid part of the rent

(rental value – rent borne by EE) taxable S9(2)

Rental value = 10% x (AI – outgoing expenses-DA)

Application of IROS(9)(1)(a)

Income from employment includes Wages, salaries, bonuses, leave pay, fees, commissions, gratuities, perquisites or allowance

Expense AllowanceDischarge of ER’s own liability OR Reimbursement of deductible expenses

taxable

Presentation

Salary $60,000 $120,000 $60,000Meal Allowance $3,000Reimbursement for gas & utilities $3,000Housing Subsidy $60,000Outstanding Performance Award $1,250 $2,500 $1,250Refund on annual subscription $375 $750 $375Rental Value: 8%($64,625-$10,000X12X60%-$21,600X(3/12)X60%) $4,790 - - 10%($126,250-$10,000(6/12)x60%) - $2,677 -Share Option $435 $870 $435Assessable Income $69,850 $129,797 $122,060

IROS(9)(1)(c)

Place of residence provided by ER ER paid part of the rent

(rental value – rent borne by EE) taxable

IROS(9)(1)(a)(iv)

Liability testER has sole & primary liability andNot person was a surety Not assessable

Key Issue (2&3)

1/1/10 – 31/03/10 [3months]

EE acquire flat under joint name with wifeER housing subsidy $20,000 per monthER reimburse utility expenses $3,000 whole periodER contract with domestic helper $4,000/month

Application of IROS(9)(1)(c)

Place of residence provided by ER ER paid part of the rent

taxable

Application of IROS(9)(1)(a)(iv)

Liability testER has sole & primary liability and Not person was a surety Not assessable

Presentation

Salary $60,000 $120,000 $60,000Meal Allowance $3,000Reimbursement for gas & utilities $3,000Housing Subsidy $60,000Outstanding Performance Award $1,250 $2,500 $1,250Refund on annual subscription $375 $750 $375Rental Value: 8%($64,625-$10,000X12X60%-$21,600X(3/12)X60%) $4,790 - - 10%($126,250-$10,000(6/12)x60%) - $2,677 -Share Option $435 $870 $435Assessable Income $69,850 $129,797 $122,060

(4)

IROS9(1)(a)

Income from employment includes Wages, salaries, bonuses, leave pay, fees, commissions, gratuities, perquisites or allowance

taxable

Key Issue (4)

EE receive an award $5000 outstanding job performance

Application of IRO

S9(1)(a)Income from employment includes Wages, salaries, bonuses, leave pay, fees, commissions, gratuities, perquisites or allowance

taxable

Presentation

Salary $60,000 $120,000 $60,000Meal Allowance $3,000Reimbursement for gas & utilities $3,000Housing Subsidy $60,000Outstanding Performance Award $1,250 $2,500 $1,250Refund on annual subscription $375 $750 $375Rental Value: 8%($64,625-$10,000X12X60%-$21,600X(3/12)X60%) $4,790 - - 10%($126,250-$10,000(6/12)x60%) - $2,677 -Share Option $435 $870 $435Assessable Income $69,850 $129,797 $122,060

(5)

IROS12(1)(a)

Outgoing and expenseNot domestic, private or capitalWholly ,exclusively and necessarily Incurred in the production of AI

For dual purpose and Amount is separable and identifiable Apportionment allowed

deductable

IROS12(1)(a)

Depreciation allowance Plant and machinery onlyEssential for production of AIApportionment between business & private use

deductable

Key Issue (5)EE purchased a car to meet clients40% for private use (assessor agreed)EE paid insurance and licensing fees $10,000 per annumDA is given as $21,600

Application of IROS12(1)(a)

Outgoing and expenseNot domestic, private or capital Wholly ,exclusively

For dual purpose and Amount is separable and identifiable

Apportionment allowed And necessarily Incurred in the production of AI

deductable

Application of IROS12(1)(a)

Depreciation allowance Plant and machinery only Essential for production of AI Apportionment between business & private use

deductable

(given)

Presentation

Assessable Income $69,850 $129,797 $122,060 Less: Insurance & licence fees $1,500 $3,000 $1,500 Depreciation Allowance $3,240 $6,480 $3,240

$4,740 $9,480 $4,740 Net Assessable Income $65,110 $120,317 $117,320 Total Net Assessable Income (NAI) $302,747

(6)

IROS12(1)(a)

Outgoing and expenseNot domestic, private or capitalWholly ,exclusively and necessarily incurred in the production of AI

Direct connection between expenditure and production of incomeNot sufficient if only enable the duty to perform

deductable

Key Issue (6)• EE paid $3000 annual

subscription to join the HK Country Club (asked by ER)

• ER refunded $1500 to EE

Application of IROS12(1)(a)

Outgoing and expenseNot domestic, private or capital Wholly ,exclusively and necessarily

Essential to the conduct of employment Not sufficient if only related to and aid production of income

Application of IROS12(1)(a)(continue)

Outgoing and expenseincurred in the production of AI

Direct connection between expenditure and production of income Not sufficient if only enable the duty to perform

deductable

Presentation

Salary $60,000 $120,000 $60,000Meal Allowance $3,000Reimbursement for gas & utilities $3,000Housing Subsidy $60,000Outstanding Performance Award $1,250 $2,500 $1,250Refund on annual subscription $375 $750 $375Rental Value: 8%($64,625-$10,000X12X60%-$21,600X(3/12)X60%) $4,790 - - 10%($126,250-$10,000(6/12)x60%) - $2,677 -Share Option $435 $870 $435Assessable Income $69,850 $129,797 $122,060

(7)

IROS9(1)(d)

Share OptionObtained as holder of an office/ employment Gain realized on exercise or assignment or release of share option

taxable

Key Issue (7)1/12/08

ER granted EE a share option cost of $100 to purchase 1,000 shares @ $2 each

12/1/09EE sold the option

4/9/09EE exercised 600 shares (Market price @ $5 each)

Application of IRO

ComputationTaxable gain = the excess of market value on date of exercise over consideration given for the shares and option

$5x 600 – ($100 x 600/1000 + $2 x600)= $1740

Presentation

Salary $60,000 $120,000 $60,000Meal Allowance $3,000Reimbursement for gas & utilities $3,000Housing Subsidy $60,000Outstanding Performance Award $1,250 $2,500 $1,250Refund on annual subscription $375 $750 $375Rental Value: 8%($64,625-$10,000X12X60%-$21,600X(3/12)X60%) $4,790 - - 10%($126,250-$10,000(6/12)x60%) - $2,677 -Share Option $435 $870 $435Assessable Income $69,850 $129,797 $122,060

(8)

IROS29

Married person allowanceMarried andHis/her spouse does not have AI

Grant

IROS31Child Allowance

maintain unmarried child at any time during Y/A One of age requirement:

Aged ≥18 but < 25 and receive full-time education

Grant

Key Issue (8)

EE’s wife no AIEE’s son aged 19Studies in CanadaEE’s sister paid EE’s son’s school fee & wholly supported his living

Application of IROS29

Married person allowanceMarried and His/her spouse does not have AI

Grant

Application of IROS31

Child Allowancemaintain unmarried child at any time during Y/A One of age requirement:

Aged ≥18 but < 25 and receive full-time education

Grant

Presentation

Total Net Assessable Income (NAI) $302,747 Less: Concessionary Deductions under Part IVA Approved Charitable Deductions (limit to 25%) $105,961.45 Elderly Residential Care Expense (Mrs. Ching's mother & father) $120,000 Contribution to Retirement Scheme $12,000 Net Assessable Income After Concessionary Deductions $64,785.55 Less: Personal Allowance under Part V Married Person All'ce $216,000 Dependent Parent All'ce (DPA - Mr. Ching's Mother) $60,000 Disabled Dependent All'ce (Mrs. Ching's Mother) $60,000 Net Chargeable Income (NCI) ($271,214.45)

(9)

IROS30

Dependent Parent Allowancethe person or spouse not living apart maintains his/her or spouse’s parent

Parent Ordinarily resident in HK and Aged ≥60 or aged <60 but eligible to claim the Gov’t’s disability allowance

Grant

IROAdditional Dependent parent allowance

Taxpayer reside with parent continuously throughout Y/Agrant

Key Issue (9)

EE’s mother aged 65lives together with the EE’s family

EE’s father aged 67fully maintained by the EE, butLives in the PRC

Application of IROS30

Dependent Parent Allowancepersonor spouse not living apart maintains his/spouse’s parent

Parent Ordinarily resident in HK andAged ≥60 or aged <60 but eligible to claim the Gov’t’s disability allowance

Grant

(F) (M)

(M)

(M) (M)

(F) (F)

(F)

Application of IROAdditional Dependent parent allowance

Taxpayer reside with parent continuously throughout Y/Agrant (M)

(M)

Presentation

Total Net Assessable Income (NAI) $302,747 Less: Concessionary Deductions under Part IVA Approved Charitable Deductions (limit to 25%) $105,961.45 Elderly Residential Care Expense (Mrs. Ching's mother & father) $120,000 Contribution to Retirement Scheme $12,000 Net Assessable Income After Concessionary Deductions $64,785.55 Less: Personal Allowance under Part V Married Person All'ce $216,000 Dependent Parent All'ce (DPA - Mr. Ching's Mother) $60,000 Disabled Dependent All'ce (Mrs. Ching's Mother) $60,000 Net Chargeable Income (NCI) ($271,214.45)

(10)

IROS26(D)

Elderly residential Care expenseERCE paid by the person or his/her spouse to a residential care home in respect of the person’s or his/her spouse’s parent or grandparentAge ≥60 or <60 but eligible to claim the Govn’t disability allowance Grant

Max $60,000 each elderly

IROS26(D) con’tElderly Residential Care expense

Max $60,000 each elderlyDDA can still be claimed if the same elderly is eligible for the Govn’t disability allowance

IROS31(A)

“dependent” eligible to claim the Gov’t’s disability allowance

Dependent” includes Parent qualifying for DPA/ERCE

Grant

Key Issue (10)EE’s mother-in-law aged 53

EE’s father-in-law, aged 60Both stay in a registered Nursing Home EE paid ERCE totaling $150,000

Oct 2009

Legs broken

Feb 2010,

lodged claim on being eligible for Gov’t’s Disability All’ce

May 2010,

received approval

Application of IROS26(D)

Elderly residential Care expenseERCE paid by the person or his/her spouse to a residential care home in respect of the person’s or his/her spouse’s parent or grandparent Age ≥60 or <60 but eligible to claim the Govn’t disability allowance Grant (both)

Max $60,000 each elderly

(both)

(both)

Application of IROS31(A)

“dependent” eligible to claim the Gov’t’s disability allowance

Dependent” includes Parent qualifying for DPA/ERCE

Grant (mother-in-law) (mother-in-law)

Presentation

Total Net Assessable Income (NAI) $302,747 Less: Concessionary Deductions under Part IVA Approved Charitable Deductions (limit to 35%) $105,961.45 Elderly Residential Care Expense (Mrs. Ching's mother & father) $120,000 Contribution to Retirement Scheme $12,000 Net Assessable Income After Concessionary Deductions $64,785.55 Less: Personal Allowance under Part V Married Person All'ce $216,000 Dependent Parent All'ce (DPA - Mr. Ching's Mother) $60,000 Disabled Dependent All'ce (Mrs. Ching's Mother) $60,000 Net Chargeable Income (NCI) ($271,214.45)

(11)

IROS26C

Approved Charitable DonationAggregate of ACD made during the Y/A by the person or his/her spouse

Cash≧ $100 in aggregate

Grant Max : 35%x (AI-outgoing expenses- DA)

Key Issue (11)

Cash donation $110,000 Po Leung Kuk

Application of IROS26C

Approved Charitable DonationAggregate of ACD made during the Y/A by the person or his/her spouse

Cash ≧ $100 in aggregate

Grant Max : 35%x (AI-outgoing expenses- DA)

Presentation

Total Net Assessable Income (NAI) $302,747 Less: Concessionary Deductions under Part IVA Approved Charitable Deductions (limit to 35%) $105,961.45 Elderly Residential Care Expense (Mrs. Ching's mother & father) $120,000 Contribution to Retirement Scheme $12,000 Net Assessable Income After Concessionary Deductions $64,785.55 Less: Personal Allowance under Part V Married Person All'ce $216,000 Dependent Parent All'ce (DPA - Mr. Ching's Mother) $60,000 Disabled Dependent All'ce (Mrs. Ching's Mother) $60,000 Net Chargeable Income (NCI) ($271,214.45)

(12)

IROS26G

Contribution to Recognized retirement Schemes

Recognized retirement scheme include MPFAmount: lesser of Contribution paid by EE or mandatory contribution to MPF

GrantMax : $12,000 in a Y/A

Key Issue (12)

EE made Mandatory contribution $12,000 to MPF scheme

Application of IROS26G

Contribution to Recognized retirement Schemes

RRS include MPF Amount: lesser of Contribution paid by EE or mandatory contribution to MPF

Grant Max : $12,000 in a Y/A

Presentation

Total Net Assessable Income (NAI) $302,747 Less: Concessionary Deductions under Part IVA Approved Charitable Deductions (limit to 35%) $105,961.45 Elderly Residential Care Expense (Mrs. Ching's mother & father) $120,000 Contribution to Retirement Scheme $12,000 Net Assessable Income After Concessionary Deductions $64,785.55 Less: Personal Allowance under Part V Married Person All'ce $216,000 Dependent Parent All'ce (DPA - Mr. Ching's Mother) $60,000 Disabled Dependent All'ce (Mrs. Ching's Mother) $60,000 Net Chargeable Income (NCI) ($271,214.45)

Salaries Tax of Mr ChingYear of Assessment 2009/2010

1/4/09 - 30/6/09 1/7/09 - 31/12/09 1/1/10 - 31/3/10Salary $60,000 $120,000 $60,000Meal Allowance $3,000Reimbursement for gas & utilities $3,000Housing Subsidy $60,000Outstanding Performance Award $1,250 $2,500 $1,250Refund on annual subscription $375 $750 $375Rental Value: 8%($64,625-$10,000X12X60%-$21,600X(3/12)X60%) $4,790 - - 10%($126,250-$10,000(6/12)x60%) - $2,677 -Share Option $435 $870 $435Assessable Income $69,850 $129,797 $122,060 Less: Insurance & licence fees $1,500 $3,000 $1,500 Depreciation Allowance $3,240 $6,480 $3,240

$4,740 $9,480 $4,740 Net Assessable Income $65,110 $120,317 $117,320 Total Net Assessable Income (NAI) $302,747 Less: Concessionary Deductions under Part IVA Approved Charitable Deductions (limit to 35%) $105,961.45 Elderly Residential Care Expense (Mrs. Ching's mother & father) $120,000 Contribution to Retirement Scheme $12,000 Net Assessable Income After Concessionary Deductions $64,785.55 Less: Personal Allowance under Part V Married Person All'ce $216,000 Dependent Parent All'ce (DPA - Mr. Ching's Mother) $60,000 Disabled Dependent All'ce (Mrs. Ching's Mother) $60,000 Net Chargeable Income (NCI) ($271,214.45)(NAI-Concessionary Deductions)X15% $9,717.83 Total Salaries Tax Liabitlity Nil

Final Computation

Thank You for Listening!