Unit 3

Question 1
The assessor had agreed that Mr Benson’s employment with Exxon Limited is a foreign sourced
employment. During the year ended 31 March 2019, he had spent 260 days and 65 days working in
Hong Kong and USA respectively. The remaining time was his annual leave. He spent his vacation in
Hawaii. Mr Benson received remuneration of HK$800,000 for the whole year. Advise the amount of
chargeable income for Mr Benson for Hong Kong salaries tax purpose.

Question 2
Mary was employed by Nelon (HK) Limited as a sales supervisor. From 1 April 2018 onwards, Nelon
(HK) Limited planned to second Mary to Taiwan to explore business opportunity. A new contract was
signed by Mary with the newly set up Nelon (Taiwan) Limited in Taiwan. Her duties remained the same
as before and she was still under the Hong Kong company’s control at all times since Nelon (Taiwan)
Limited is a “shelf” company. Mary travelled between Taiwan and Hong Kong frequently throughout
the whole year. Her remuneration was actually paid by Nelon (HK) Limited in Hong Kong. Neither
Mary nor any of the Nelon’s had reported any termination of employment or commencement of new
employment for Mary.
Advise the source of employment of Mary for the year 2018/19.

Question 3
James Bond is working as an Executive Manager for a UK company. From December 2017, he started
to travel around the region visiting the Company’s operations. James’s travelling schedule is extracted
as follows:
Place of stay Purpose of stay
2017 3-18 Nov Korea Business
10–31 Dec Hong Kong Business
2018 1–20 Jan Hong Kong Business
1–18 Feb Hong Kong Business
1–15 Mar Japan Business
1–21 Apr Hong Kong Business
1 May –30 Jul Hong Kong Business & 10 days of annual leave
8–31 Aug Hong Kong Business
5–20 Sept Singapore Business
1–21 Oct Hong Kong Business
15 Nov–20 Dec Hong Kong Business
2019 20 Jan–20 Feb Singapore/China Business
2 Apr-28 May China Business
All remuneration was paid into James’s bank accounts in the UK. The monthly salary for James is
$120,000 per month in year 2017 to 2019.
Required:
(a) Based on the information provided, determine whether James is subject to salaries tax in Hong Kong
in respect of the employment income he received from the UK company for each of the years of
assessment 2017/18 and 2018/19 and if yes, on what basis. Briefly explain.
(b) Calculate James’s Hong Kong assessable incomes, if any, for the years of assessment 2017/18 and
2018/19.
Question 4

John Jones is employed by RA Corporation, a large international corporation based in the Australia.
According to his employment contract, which is enforceable in the Australia, John’s duties are performed
exclusively to oversee and supervise operations of the various affiliated companies of RA Corporation in
the South East Asia region. John’s salary is paid in Australia dollars into his bank account in the Sydney.
However, for convenience purposes, most of his work is performed in Hong Kong. John’s travelling
schedule for the year ended 31 March 2019 was as follows:
Australia 40 days (including 15 days annual leave)
Hong Kong 175 days
PRC 100 days
Korea 20 days
Japan 30 days
365 days
In relation to the year ended 31 March 2019, John had the following income and expenditure (all amounts
are denominated in Hong Kong dollars):
1. Annual salary of $1,200,000.
2. A home-leave travelling allowance of $80,000, of which $65,000 was actually expended for air tickets
for home-leave purposes.
3. An entertainment allowance of $100,000.
4. RA Corporation provides John with a car for his use in Hong Kong. The market value of the car was
$200,000 and the second hand value as at 31 March 2019 was $150,000. John also received a petrol
cost allowance of $1,000 per month.
5. RA Corporation operates a medical insurance scheme for all its employees through an insurance
company called BUPA. During the year, John became seriously ill and was hospitalised for one
month. In order that he could continue to carry out his employment duties whilst in hospital, he paid
an extra $60,000 for a private room. Of which $35,000 were reimbursed by BUPA as the basic
hospital fees and public ward fees of his medical scheme, while the remaining fees for the private
room were reimbursed by RA Corporation.
6. RA has set up an educational trust. The trustee made a grant of $164,000 to John’s son who is studying
in Canada.
7. Upon recommendation of a director, John successfully joined the Hong Kong Jockey Club with effect
from 1 October 2018. He paid an annual subscription of $36,000 and obtained a reimbursement of half
of this amount from RM Corporation. John often met with the directors and with clients in the Club.
8. During the year, RA Corporation received and paid the following tax bills in respect of John:
Hong Kong salaries tax $150,000
PRC individual income tax $160,000
Other countries’ income tax $40,000

Required:

a) Based on the information provided, determine whether John is subject to salaries tax in Hong Kong in
respect of the employment income he received from the RA Corporation for the years of assessment
2018/19 and if yes, on what basis. Briefly explain.

b) Compute the assessable income of John Jones, if any, for the year ended 31 March 2019, giving
explanations of the treatment you have accorded for tax purposes to items (6) and (8) above.