BUSI 0018 Hong Kong Taxation

Tutorial Questions
Unit 4 Salaries Tax (2)

Question 10
Mr Lam, the managing director of one of your clients, Galaxy 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 Lam 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

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Question 11
Part (a)
Explain whether, and if so to what extent, the amount described in each of the following
cases is subject to Hong Kong salaries tax:
(1)

Mr. Tam, the chief accountant of a local manufacturing company, was approached by
a competitor company which offered him a job. In order to convince him to remain in
the existing position, his existing employer paid him a "non-competition payment"
amounting to $100,000 in return for a promise that he would not accept the offer.

(2)

PQR (HK) Co. Ltd. was given permission to list its shares on the Hong Kong Stock
Exchange. Under the terms of the listing arrangement with the Stock Exchange, each
employee of the company was entitled to a certain number of shares upon payment of
a price of $15 per share. This was also the amount paid by general members of the
public who wish to subscribe for the newly listed shares, but the general public might
not be allocated with the number of shares that they subscribed for in the case of oversubscription. Mr. Wong, an existing employee, applied to subscribe for the shares.
After exercising this right to acquire the shares, Mr. Wong thereafter sold the shares
in the open market and earned a profit.

(3)

Mr. Yu became seriously ill and was hospitalised for nearly one month. His hospital
fee of $50,000 was paid by an insurance company under a health policy undertaken
by Mr. Yus employer. Mr. Yus employer paid an annual premium of $3,000 on this
policy to the insurance company.

Part (b)
Peter Pang was employed by XYZ Company Limited at a monthly salary of $20,000 up to 30
June 2009. 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 2009, Peter was promoted to manager with a revised monthly salary of $30,000.
He moved into the companys quarter at a rent of $3,000 per month payable to XYZ.
In December 2009, 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.
You are required to compute the assessable income for the year of assessment 2009/10 for
Peter Pang.

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