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for Mr. and Mrs. Mak: - under separate taxation; and - if they elect joint assessment (JA) - Then we will determine if it is advantageous for them to choose joint assessment B) Mr. Mak’s employment income - Mr. Mak‟s employment: Marketing Manager, Beta Ltd - Compensation/ Benefits he received from his employment in Y/A 2009/10: - Basic monthly salary - Commission on sales he solicited - Apartment provided by his employer at a subsidized rent - Realized his gain upon exercising share options, which were granted by Beta Ltd in Y/A 2008/09 B-1) Salaries and Commission - Interpretation of Assessable Income under the IRO General coverage: s.9(1)(a) - “Income from employment includes wages, salaries, leave pay, fees, commission, bonus, gratuity, perquisite (i.e. fringe benefit), allowance, whether derived from employer or others” - Mr. Mak‟s employment: Marketing Manager, Beta Ltd For year ended 31 March 2010 (Y/A 2009/10), - Salary: $50,000/month, $600,000 for the year - Commission: 1% on the sales solicited by him - Mr. Mak solicited $4,000,000 sales in the year, his commission would be $40,000 - Mr. Mak was entitled to the commission under his employment contract The salary and commission, amounting to $640,000, are income arising from employment, and would be assessable under the general coverage of s.9(1)(a) B-2) Accommodation at subsidized rent - Beta Ltd leased a flat at $25,000/month, but provided the flat to Mr. Mak at a nominal rent of only $1,000/month, deducted directly from his salary. - This benefit for housing accommodation is included in assessable income under specific coverage If a “place of residence” is provided by the employer or its “associated corporation” at a nominal rent, “rental value” is taxable but to be reduced by the rent paid by the employee – s.9(1)(c) Rental value is calculated as 10% x (income from employer – outgoings & expenses – depreciation allowance)
as a concessionary deduction.Other requirement for claiming ACD: .88 or to the Government.included under specific coverage .NAI is simply the AI.For share option obtained as holder of an office/employment.000>$100) .000 is deductible B-3) Share option benefit .Mr.Sum up the above income from employment to get Assessable Income .Meaning of ACD: “A donation of money to any approved charitable institution or trust of a public character which is exempt from tax under s.Community Chest of HK approved charity . Mak = $712.000 – 0) = $64.000 x $10 – 10. Mr. Allowance) for 08/09 onwards. thus we need not consider Mr.200] amount claimed is within max. Max.e.” .000 - C) Net Assessable Income of Mr.ACD. not in kind . Limit for the claim: 35% of (AI – expenses – Depr.26C .000) no duplication of claims (Mrs.in cash.e. Mak‟s share option was granted under “Staff Share Option Scheme”.- - Income from employer excludes share option benefits and lump-sum received at retirement/ termination of contract.000 x 35% = $249.has not been allowed under profits tax [Max. i.000 x $8 = $ 20. is available to taxpayer under both progressive and standard tax rate . Mak = $1.000 < $249. Mak‟s gain upon exercising the share options yet.000 .not less than $100 in aggregate ($5. for charitable purposes. gain realized upon exercise/ assignment/ release would be taxable Mr.Can claim for Approved Charitable Donations under s.000 to Community Chest of Hong Kong . Mak made a donation of $5. Mak has no outgoings & expenses/ depreciation allowance Rental value = 10% x ($640.000 is assessable Rent suffered by Mr. Limit for Mr. Mak does not need the deduction) . Mak . cost of getting the option and acquiring the shares) Any subsequent gain on actual disposal of the shares is not taxable Taxable gain = 10. obtained from his employment ****(Timeline)**** Taxable gain realized by exercise is deemed to be Market value on date of exercise – Consideration given for the shares and option (i.000 x 12 = $12. $712.**(show a table. may extract relevant part from the appendix table I)** D) Concessionary deductions .No outgoings and expenses/ Depreciation allowance/ loss b/f /Self-education expenses to be adjusted . limit allowed ($5.
000 x 2 = $100. Mak’s grandmother living in London. and incapacitated for work due to mental or physical disability Mr.granted if maintaining unmarried child at any time during the Y/A . all CA should be claimed by one person only. Mak’s Family .000 . since they both have assessable income but do not elect JA) E-2) Child Allowance . Mak‟s grandmother was: .1) Maintained by Mr. As Mrs. that can be covered by her basic allowance. Mak are taxed as separate individual.Not granted married person allowance (Mr.aged 60 or more. Mak‟s son and daughter turned 15 and 17 respectively during the Y/A Both within the age requirement Full allowance is given even if the conditions are satisfied for part of the year **(timeline showing the daughter‟s marital status in the Y/A)*** the daughter was under 17 and also unmarried before her registration on 20th February. Mak E-1) Basic allowance .ordinarily resident in Hong Kong. - E-3) What about Mr.000) since: Both children were qualifying as unmarried child for at least part of the year Both were maintained by Mr.Basic Allowance of $108. Personal Allowances for Mr. nominated by the spouses.married with two children . Mak/ his spouse For husband and wife not living apart. Mak. Full Child allowance can be claimed on 2 children (Total CA = $50. and Mrs.Granted to all taxpayers who are charged by salaries tax .000 CA should be granted to Mr. eligible to claim the Government‟s disability allowance Mr. Mak. supported by Mr.E) Mr. Mak’s Grandmother in London? Dependent Grandparent Allowance Granted if the person or spouse not living apart maintains his/her or spouse's grandparent who is: .000 for the year. Mak . and .His son was 15 and his daughter was 17 on their birthdays during Y/A 2009/10 .age requirement: under age of 18/ age of or over 18 but under 25 and receiving full-time education/ age of or over 18. or if aged under 60. Mak‟s salary was only $50. the $100. 2010 qualifying as an unmarried child for part of the year In Y/A 2009/10.Mr.
a. but before the personal allowance. Net chargeable income = $499.Would be great if there is a way to better utilize the allowance . . Mak‟s tax liability for 09/10.f.regular and substantial period of visits from year to year (Lysaght v CIR) . shall be given to Mr. while Mr. Mak CANNOT claim DGPA on his grandmother.830 F-2) Computation of Mrs. 1998/99) in money towards the maintenance Mr. .Hence. Mak. “Ordinarily resides” means .Standard rate is applied on the NAI remaining after concessionary deduction. which can only be claimed by one spouse.e. Mak is still chargeable to tax.000 . i.has a normal and usual place of resident in Hong Kong From Case Laws. (>$12. $707.e. $72.000 salary in the Y/A from part-time job in a trading firm . or received from the person or spouse contribution of not less than $12.Applying progressive tax rate on NCI.After deducting the personal allowance.e. F-1) Computation of Mr. Mak Observation: .No chargeable income after deducting the basic allowance .000 p.830 . Mak’s Tax .Earned $50. Mak remits $2.a. Mak has unabsorbed allowance.000) 2) aged 60 or more (she was 60 on her last birthday) 3) NOT ordinarily resident in Hong Kong - About “Ordinarily resident” in Hong Kong: .show appendix table II .050 .No tax for Mrs.000. ACD deductions and CA.$707. tax liability = $72. .000 p. i. totaling a contribution of $24.- “Maintained” means resided with the person or spouse for a continuous period of not less than 6 months other than for full consideration.000 monthly to support her living. is the lower of the two. Mak‟s Grandmother was living in London not staying in Hong Kong home for regular and substantial periods Not ordinarily resident in HK Mr.a place of abode is maintained (Copper v Cadwalader) Mr. Mak’s Tax . (w. ignoring provisional tax.Mrs.000 x 15% = $106. this scenario actually aligns with the original objective of continuing to allow couples to elect for Joint Assessment G) Joint Assessment .Mr.show appendix table I .
within that Y/A or the following Y/A. Mak‟s case - - - G-1) Computation of Mr. Mak’s Tax under JA .within one month after the date on which the assessment becomes final and conclusive.Time limit: . Mak $0 / Tax saved Mr.970. Mak to elect Joint Assessment. and Mrs. JA is elected to alleviate Mr. This would reduce Mr.income are aggregated at NAI level.show appendix table III . or . Mak’s salaries tax liability from $72.970 .830 Joint Assessment / Mrs.550 . Mak.10(3)(a) G-3) Procedures for selecting JA . since Mrs. allowance fully utilized . whichever is later H) Conclusion It is advantageous for Mr. limit for concessionary deductions can be raised.970 Mr. and Mrs.Both election/withdrawal must be made jointly by husband and wife .The chargeable person would be Mr.10(2)(b) [the max. and Mrs.Applicable tax liability = Lower of the two = $62.Tax under standard rate (on NAI – Concessionary deductions) = $113.860 G-2) Whose Liability? . then applies the concessionary deductions and personal allowances Tax under JA system is smaller than that calculated separately when one spouse has unabsorbed allowance while the other spouse is chargeable to tax – s.- Joint assessment aggregates the spouses‟ income at NAI level.Election made in specified form .830 $62. or [As a combined “married person allowance” on the aggregate income can be better utilized then having two separate basic allowances on two separate incomes] aggregate of tax on respective NCI > tax on aggregated NCI – s. since it is now calculated as a % of the aggregate income in JA] The former scenario is applicable in Mr. and Mrs. .10(3) spouse has unabsorbed deductions/allowance thus resulting in „nil‟ NCI: Chargeable person = the spouse who has positive NCI chargeable to tax if joint assessment was not elected – s. Mak Separate Taxation $72.970 $9.10(2)(a). Mak $72.830 to $62.Tax under progressive rate (on NCI) = $62. Mak has no tax liability if under separate taxation. Mak‟s tax liability only Under Joint Assessment – s.
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