THE HANG SENG UNIVERSITY OF HONG KONG
Bachelor Degree Programmes
2020-21 Semester 2 Mid-term Take-home Assignment
Module Code : ACY3003
Module Title : Hong Kong Taxation
Date
: 12 March 2021
Time Allowed : 3 hours (HKT19:30 to 22:30 including submission time)
Notes to Candidates:
1.
This question paper has 4 pages (including this cover sheet).
2.
There are 3 questions in total. ALL questions must be answered. Marks allocated to parts of
questions are indicated in brackets.
3.
This mid-term take-home assignment will be marked out of 40.
4.
You must complete the questions in HANDWRITING in the answer book and write your
name and student ID at the top of each page.
5.
Start a new page for each question in your answer.
6.
You are reminded of the necessity for clear and orderly presentation in your answers. Show all
your WORKINGS and CALCULATION STEPS to earn full credit.
7.
Answers should be rounded down to the nearest dollars (ignore decimal points).
8.
You should submit your answers in PDF format.
9.
The file name should be a combination of the class, your name and student ID (eg
L01_chantaiman_123456).
10. The answer should be uploaded to Moodle before HKT22:30 on 12 March 2021.
11.
Late submissions will not be marked. In case that there is a failure of Moodle, please send
your answer to your module instructor through email before the deadline:
Class
ACY3003 L01, L02, L03, L04
ACY3003 L05, L06
ACY3003 L07
Teacher
Ricky Lam
Vivian Zhang
Lilian Yeung
Email Address
rickylam@hsu.edu.hk
vivianzhang@hsu.edu.hk
lilian@hsu.edu.hk
Question 1 (10 marks)
Happy Ltd (HL) carries on business in Hong Kong. On 30 April 2020, Jason submitted his
resignation to HL and terminated his employment with immediate effect by foregoing one-month’s
salary in lieu of notice.
On the same day, Jason also advised HL that he would leave Hong Kong on 20 May 2020 and go to
the United States to study the MBA program. To pay tuition fee, he requested HL to remit his final
payment (including salary and bonus after deducting the one-month’s salary in lieu of notice) to his
bank account in the United States.
During the year of assessment 2020/21, HL also hired three new staff. The total number of staff
(including the three new staff) of HL was 121 as of 31 March 2021.
Required:
(a) Based on the Inland Revenue Ordinance and prevailing practice of the Inland Revenue
Department, explain the general reporting obligations of an employer in respect of
i) the commencement of new staff;
ii) all staff; and
iii) the resignation of existing staff.
(5 marks)
(b) Pertaining to Jason’s departure from Hong Kong, advise Happy Ltd of its reporting
obligations including the due dates of compliance.
(5 marks)
[Total for Q1: 10 marks]
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Question 2 (20 marks)
CK Chan is currently employed as the Chief Financial Officer of Samson Trading Limited (Samson)
a company incorporated and carrying on trading business in Hong Kong. During the year ended 31
March 2021, CK Chan had following income and expenditure:
1.
Annual gross salary of $1,200,000, out of which 5% is deducted for MPF contribution.
2.
Performance bonus of $150,000 and passage allowance of HK$10,000 per month.
3.
As an employee benefit, Samson reimbursed CK Chan’s mobile phone bills of HK$15,700 and
broadband service bills of HK$4,000. The mobile phone’s account name is CK Chan but the
broadband service account is under the name of Samson.
4.
CK Chan rented an apartment in Sai Kung for the full year ended 31 March 2021 at a cost of
$12,000 per month. He provided the related rental agreement and all the rental receipts to
Samson. Samson reimbursed $10,000 per month to CK Chan. The electricity and water bills
totaling $18,000 were paid by CK Chan in the year and these were not reimbursed by Samson.
5.
On 2 June 2020, CK Chan was granted an option to purchase 50,000 shares at $4 each in Samson.
He paid $2,000 for this option. On 15 August 2020, he exercised the option to acquire 40,000
shares. He then released the options of purchasing the remaining shares back to Samson on 31
January 2021. Samson paid CK Chan $50,000 compensation for the release. On 7 February
2021 CK Chan sold all the Samson shares that he held through an agent in Hong Kong.
2 June 2020
31 January 2021
6.
$12
$14
15 August 2020
7 February 2021
CK Chan paid the following annual subscription fees:
The Hong Kong Institute of Certified Public Accountants (HKICPA)
Hong Kong Cricket Club
$15
$10
$2,500
$30,000
7.
CK Chan is married with two children. His wife is a housewife. His daughter aged 13, is
studying in Hong Kong. Their son, aged 23, graduated in 2019 in Hong Kong, is now employed
by a Hong Kong advertising agency as graphics designer on a full-time basis.
8.
During the year, CK Chan made a cash donation of $95 to the Hong Kong Red Cross.
9.
CK Chan’s mother, aged 82, lives together with CK Chan and his family throughout the year.
CK Chan paid a total of $6,000 to maintain her mother during the year.
Required:
Based on the Inland Revenue Ordinance and the prevailing practice, prepare the Hong Kong
salaries tax computation for CK Chan for the year of assessment 2020/21, showing clearly the
basis period, assessable income, net assessable income, net chargeable income and the salaries
tax payable. Ignore provisional tax and tax concession.
[Total for Q2: 20 marks]
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Question 3 (10 marks)
Mr White is a British citizen working for a UK company in London as regional marketing manager.
He is required to travel to Asian countries for sales promotion. Mr White’s travelling schedule for
the year ended 31 March 2021 was as follows:
Year
Date
2020 6 Apr – 12 Apr
1 May – 10 May
6 Jun – 13 Jul
3 Aug – 18 Aug
17 Oct – 2 Nov
18 Dec – 28 Dec
2021 2 Jan – 10 Jan
5 Feb – 18 Feb
16 Mar – 27 Mar
Place of Stay
Japan
Hong Kong
Thailand
Hong Kong
Hong Kong
Hong Kong
Singapore
Japan
Hong Kong
Purpose of Stay
Business
Business
Business and 13 days of Annual Leave
Business
Business
Business and 5 days of Annual Leave
Business
Business
Business
Required:
(a) Calculate the total number of days that Mr White visited Hong Kong in the year of
assessment 2020/21 and discuss whether he will be subject to salaries tax exemption under
the “60 days rule”. Show the number of days for each trip in your calculation.
(5 marks)
(b) Calculate the day-in-day-out ratio for Mr White assuming that he is subject to salaries tax
for the year of assessment 2020/21. Show your detailed workings.
(5 marks)
[Total for Q3: 10 marks]
End of Take-home Assignment
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