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(Revised Solution) Take Home Assignment 4 (2023S)

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408 views

(Revised Solution) Take Home Assignment 4 (2023S)

Uploaded by

何健珩
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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ACCT 4410 Taxation – Assignment 4

ANSWER

1
Take home exercise #4: ACCT 4410 Taxation – 2023 Spring Semester – ANSWER
Question:

a) To what extent Danny Craig is liable to Hong Kong salaries tax

1. Salaries tax is charged on income from an employment, office and pension arising in or derived
from Hong Kong.

2. Income from employment includes income derived from services rendered in Hong Kong but
excludes income derived from services rendered outside Hong Kong.

3. Concerning locality of employment, there are 3 factors that determine its locality: location of
employment contract; location of employer (residence); and location of remuneration paid.

4. Since Danny Craig’s employer is a company that carries on business in Kent, the UK, the
residence of his employer is outside Hong Kong, he was having a foreign (offshore) employment.
Potentially, all his income is NOT assessable to salaries tax.

5. However, income relating to services rendered in Hong Kong is still assessable to salaries tax,
i.e., based on time apportionment of income, day-in & day-out apportionment.

6. As Danny lives with family in Hong Kong, he did not qualify as visitor.

7. At the same time, he was in Hong Kong longer than 60 days, and he performed services in Hong
Kong, he was not able to exempt his income from tax by claiming all the services rendered
outside Hong Kong.

2
Part b) Danny Craig’s salaries tax liabilities for the year of assessment 2022/23

Danny Craig
Salaries Tax Computation
For the year of assessment 2022/23

$
Salaries 1,409,500
COLA cash allowance 36,000
Cash bonus 30,000
Holiday journey benefit 7,500
Hotel room charges (60,000 x 5/40)
Reimbursement of BritCham HK subscription 4,500
1,487,500

Time apportionment:
HK: 1,487,500 x (160-20) / (365-25) 612,500

Rental value of residence (612,500 x 10%) 61,250


Less: rent suffered (96,000 x 10%) 9,600 51,650

Assessable income 664,150


Less: self-education expenses (max.) 100,000
Net assessable income 564,150
Less: concessionary deductions
MPF contribution (max.) 18,000
Qualifying premium paid under VHIS (8K) 8,000
Tax deductible MPF voluntary contributions (cap) 60,000
Approved charitable donations (664,150 x 35%) 80,000 166,000

Net assessable income before personal allowances 398,150


Less: personal allowances
Basic allowance 132,000
Net chargeable income 266,150

Salaries tax payable at progressive rates 27,245


(266,150 – 200,000) x 17% + 16,000

Salaries tax at standard rate (398,150 x 15%) 59,722


(which is higher than that of at progressive rates, so not
applied)

Correct treatment of items which require no adjustment:


Total serviced apartment charges $96,000; Donation to British Red Cros $48,000;
Child allowance $120,000; Dependent parent allowance $50,000; VHIS on Michelle $6,000

3
Part c) Advise whether Danny and Jennifer Craig should elect for joint assessment

Jennifer Craig
Salaries Tax Computation
For the year of assessment 2022/23

$
Salaries 141,600
Less: concessionary deductions
MPF contribution (actual) 141,600 x 5% 7,080
Approved charitable donations 10,000 17,080

Net assessable income before personal allowances 124,520


Less: personal allowances
Basic allowance 132,000
Net chargeable income -7,480

Salaries tax payable at progressive rates 0

Salaries tax at standard rate (124,520 x 15%) 18,678


(which is higher than that of at progressive rates, so not
applied)

4
Danny and Jennifer Craig
Salaries Tax Computation (Joint)
For the year of assessment 2022/23

$
Salaries 564,150 + 141,600 705,750
Less: concessionary deductions
MPF contribution 18,000 + 7,080 25,080
Qualifying premium paid under VHIS (8K) 8,000
Tax deductible MPF voluntary contributions (cap) 60,000
Approved charitable donations 80,000 + 10,000 90,000 183,080

Net assessable income before personal allowances 522,670


Less: personal allowances
Married person’s allowance 264,000
Net chargeable income 258,670

Salaries tax payable at progressive rates 25,973


(258,670 – 200,000) x 17% + 16,000

Salaries tax at standard rate (522,670 x 15%) 78,400


(which is higher than that of at progressive rates, so not
applied)

Advice: based on the amount of tax savings of $(27,245 – 25,973) = $1,272, it is advisable for
the couple to elect for joint assessment.

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