Marks

(b) Mr Black
Salaries tax assessment
Year of assessment 2017/18
$
Salary (90,000 x 12) 1,080,000 0·5
Travelling allowance (10,000 x 12) 120,000 0·5
Passage allowance 20,000 0·5
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1,220,000

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Time-apportionment:
HK: (121 + 77 – 10) days + 10 days x 188/(365 – 10) days = 193 days 2·5
Taxable: 1,220,000 x 193/365 645,096 0·5
Rental value (10% x 645,096) 64,509 1
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709,605
Gain on share option
– On sale (9,000 – 2,000 x 2/10) 8,600 1
– On exercise [8,000 x (19 – 15) – 2,000 x 8/10] 30,400 1
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39,000
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Apportioned on time-basis (39,000 x 193/365) 20,622 0·5
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Assessable income 730,227
Less: Self-education expenses (45,000) 0·5
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Net assessable income 685,227

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Correct treatment of items which require no adjustment: no tax on shipment of belongings settled by HK‑Co
($50,000), no tax on medical expenses claimed from insurance company ($48,000), no deduction for
unclaimed medical ($12,000), no tax on annual insurance premium ($1,500), no tax on London residence,
no mandatory provident fund (MPF) deduction, and no tax on sale of shares.
(0·5 mark each) 3·5
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12
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15
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6 Purple Ltd
Profits tax computation for the year of assessment 2017/18
Basis period: year ended 31 March 2018 0·5
$ $
Profit for the year per accounts 63,000 0·5
Add: Loss from trading in China listed shares 300,000 0·5
Donation 70,000 0·5
Depreciation 40,000 0·5
Loss on disposal of fixed asset 15,000 425,000 0·5
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488,000
Less: Dividend income from HK listed shares 13,000 0·5
Dividend income from China listed shares 22,000 0·5
Special contribution to mandatory provident fund (MPF) in 60,000 1
2015/16 (300,000 x 20%)
Interest income on HK$ deposit 1,000 0·5
Replacement of carpet 50,000 0·5
Environment-friendly vehicle 300,000 1
Depreciation allowance for plant and machinery 4,000 (450,000) 0·5
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38,000
Less: Donation (limited to 35%) (13,300) 1
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Assessable profit for the year 24,700

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Tax payable at 16·5% 4,075 0·5

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 Marks
Correct treatment of items which require no adjustment (Candidates are NOT required to prepare the following
table in their answer. Marks will be awarded if they are not adjusted in the tax computation.):
Taxable/non-deductible items $ Deductible/non-taxable items $
Advisory fee 1,200,000 Wages to driver for director’s use 200,000
Sub-letting income 120,000 MPF 5% mandatory 100,000
Gain from HK listed shares 800,000 MPF voluntary contribution 140,000
Gain from foreign currencies 330,000 Rent and rates for director’s residence 450,000
Interest on RMB deposit 2,000 Interest on bank overdraft 2,000
Interest income on staff loan 18,000 Interest on bank loan $200,000 4,000
(0·5 mark each) maximum 6
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15
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