Answers of Taxation Assignment
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THE CHINESE UNIVERSITY OF HONG KONG
School of Accountancy
ACCT 5160 – Taxation
(3rd Term, 2010-2011)
Assignment 3
Solution
Only the “Assessable income in Hong Kong” is required, others are for your reference.
Question 1
According to Inland Revenue Departmental Interpretation and Practice Note No. 10, the Commissioner accepts that an employment is located outside Hong Kong if all of the following three conditions are satisfied.
a. The contract of employment is negotiated and entered into, and is enforceable outside Hong Kong.
b. The employer is resident outside Hong Kong.
c. The employee's remuneration is paid to him outside Hong Kong.
Mr. Pan is not a Hong Kong resident, and he was offered the job by an American company. It is very likely that his contract of employment was negotiated and entered into and enforceable outside Hong Kong. Mr. Pan's employer is an American company, and his employer's resident status is outside Hong Kong. Mr. Pan's salary is paid to his bank account in America by his employer. Thus, all the three conditions for an employment located outside Hong Kong are satisfied, Mr. Pan's employment is outside Hong Kong.
If Mr. Pan's employment is outside Hong Kong, his salaries tax liability is determined by the number of days he stays in Hong Kong in the year of assessment concerned. Thus, Mr. Pan is not able to ascertain his Hong Kong salaries tax liability until the basis period for the year of assessment has passed. The longer the time he stays in Hong Kong for a year of assessment, the more salaries tax he has to pay.
Dual employment
In order to avoid such uncertainty, Mr. Pan may negotiate with his employer to divide his duties into two parts, namely one for the Hong Kong office and the other for the head office. When Mr. Pan is present in Hong Kong, he works for the Hong Kong office, and while he is outside Hong Kong, he works for the head office. In this way, Mr. Pan can divide his salaries into two
THE CHINESE UNIVERSITY OF HONG KONG
School of Accountancy
ACCT 5160 – Taxation
(3rd Term, 2010-2011)
Assignment 3
Solution
Only the “Assessable income in Hong Kong” is required, others are for your reference.
Question 1
According to Inland Revenue Departmental Interpretation and Practice Note No. 10, the Commissioner accepts that an employment is located outside Hong Kong if all of the following three conditions are satisfied.
a. The contract of employment is negotiated and entered into, and is enforceable outside Hong Kong.
b. The employer is resident outside Hong Kong.
c. The employee's remuneration is paid to him outside Hong Kong.
Mr. Pan is not a Hong Kong resident, and he was offered the job by an American company. It is very likely that his contract of employment was negotiated and entered into and enforceable outside Hong Kong. Mr. Pan's employer is an American company, and his employer's resident status is outside Hong Kong. Mr. Pan's salary is paid to his bank account in America by his employer. Thus, all the three conditions for an employment located outside Hong Kong are satisfied, Mr. Pan's employment is outside Hong Kong.
If Mr. Pan's employment is outside Hong Kong, his salaries tax liability is determined by the number of days he stays in Hong Kong in the year of assessment concerned. Thus, Mr. Pan is not able to ascertain his Hong Kong salaries tax liability until the basis period for the year of assessment has passed. The longer the time he stays in Hong Kong for a year of assessment, the more salaries tax he has to pay.
Dual employment
In order to avoid such uncertainty, Mr. Pan may negotiate with his employer to divide his duties into two parts, namely one for the Hong Kong office and the other for the head office. When Mr. Pan is present in Hong Kong, he works for the Hong Kong office, and while he is outside Hong Kong, he works for the head office. In this way, Mr. Pan can divide his salaries into two