THE UNIVERSITY OF HONG KONG

FACULTY OF BUSINESS AND ECONOMICS

ACCT3107 – Hong Kong Taxation

Tutorial Questions
Unit 7 – Profits Tax (1)

Question 17

Mr. and Mrs. Leung entered into a sale agreement in December 2018 in respect of a
residential property located in Wanchai, Hong Kong. The property was acquired by them
under joint names in October 2018. As a result of the sale, Mr. and Mrs. Leung earned a
gain of HK$1 million.

In a meeting with Mr. and Mrs. Leung, you also found that during the period from January
2018 to December 2018, they have entered into similar transactions of buying and selling
two other properties in Hong Kong. Total gain earned was around HK$2.5 million.

Required:

As a tax consultant, advise Mr. and Mrs. Leung whether or not the gain earned from the
property transactions would be subject to any tax in Hong Kong. You should also mention
what additional information is required for your analysis.

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Question 18

Discuss if the following activities amount to trading:

(a) Mr. Lau is an employee of an Art Gallery. He bought two paintings at an attractive
price. One of them was sold at a profit two weeks after the purchase. Another one
was sold ten years afterwards.

(b) Mr. Poon bought a flat in Pokfulam Gardens and intended to move into the flat
with his fiancée, Miss Wong, when they get married by the end of the year.
However, she did not like the flat and so he sold the flat at a profit.

(c) Mr. Wong, a police constable, operates an illegal casino inside a police station
during his off duty hours, and makes a profit therefrom.

(d) Within a period of fifteen months, Johnny Wong established three restaurants and
then sold them. He made a profit of $300,000.

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