HONG KONG SHUE YAN UNIVERSITY

BUS 405 TAX PLANNING

3rd Homework

Question 1

Mr Leung, the managing director of one of your clients, Global Trading Limited, came to
your office. He was concerned about restructuring his own salaries package, and that of
the other employees. He wanted to ensure that all fringe benefits provided by the
company were to be provided in a tax efficient manner, i.e. to minimize the salaries tax
liabilities of the employees but at minimal costs to the company.

Required:

(a) Explain to Mr Leung the extent to which fringe benefits are subject to salaries tax
in Hong Kong with reference to the relevant statutory provisions and general
principles.

(b) Advise him how to provide the following fringe benefits to the employees of the
company in a tax efficient manner:
(i) a domestic helper
(ii) low interest loan
(iii) club membership
(iv) education fee of child

Question #2

Peter Pan was employed by Curry Ltd at a monthly salary of $20,000 up to 30 June 2020.
In addition to his salary, the company also paid him a housing allowance of $5,000 per
month, but he actually lived in his own property on Hong Kong Island.

On 1 July 2020, Peter was promoted to manager with a revised monthly salary of $30,000.
He moved into the company’s quarter at a rent of $3,200 per month payable to Curry Ltd.

In December 2020, Peter was sent to London on a business trip for a month and resided in
a London hotel. The company paid all the hotel accommodation expenses, which
amounted to $24,000. During his stay in London, his family continued to reside in the
company's quarter.

On 20 May 2020, Peter was granted a share option to subscribe for 30,000 shares in the
company at $10 each. He paid $30,000 for the option. On 1 June 2020, he exercised the
option to buy 20,000 shares, of which 10,000 shares were subsequently disposed in the
market on 14 July 2020. He assigned the remaining option right to his colleague for
$60,000 on 3 August 2020. The fair market value per share on respective dates was as
follows:

20 May 2020 $14

1 June 2020 $15

1
 14 July 2020 $18
3 August 2020 $16

Compute the assessable income (A.I.) for the year of assessment 2020/21 for Peter Pan
and explain your tax treatments where appropriate.