All monetary figures shown in the question paper are Hong Kong dollars unless specifically indicated otherwise....

 

 

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All monetary figures shown in the question paper are Hong Kong dollars unless specifically indicated otherwise. The following tax rates and allowances are to be used in answering the questions: Rates and allowances - Year of assessment 2020/21 onwards Profits tax rate Corporation First $2,000,000 Remainder Unincorporated business First $2,000,000 Remainder Salaries tax progressive rate First $50,000 Next $50,000 Next $50,000 Next $50,000 Remainder Standard rate Property tax rate (Standard) Personal allowances Basic allowance Married person's allowance Child allowance: First to ninth child (each) Additional allowance in the year of birth (each) Dependent parent allowance - basic* - additional* Dependent parent allowance (aged 55-59) - basic - additional 8.25% 16.5% 7.5% 15% 2% 6% 10% 14% 17% 15% 15% $ 132,000 264,000 120,000 120,000 50,000 50,000 25,000 25,000 Conveyance and Agreement for sale Ad Valorem Stamp Duty (AVD) (Marginal reliefs ignored) Not exceeding $2,000,000 Not exceeding $3,000,000 Not exceeding $4,000,000 Not exceeding $6,000,000 Not exceeding $20,000,000 Exceeding $20,000,000 Stamp duty rates Residential properties, effective 5 Nov 2016 Non-residential properties, effective 26 Nov 2020 Special Stamp Duty Holding period Not exceeding 6 months > 6 months and ≤ 12 months > 12 months and ≤ 24 months > 12 months and ≤ 36 months Buyer's Stamp Duty Lease Rent: Lease with uncertain term Lease with term of less than 1 year Lease with term of 1 year to 3 years Lease with term of more than 3 years Exceeding 3 years Premium (without rent) Premium (with rent) Hong Kong Stock Transfer Contract notes Instrument of transfer with effect from 23/2/2013 Scale 1 1.5% 3% 4.5% 6% 7.5% 8.5% 15% flat rate Scale 2 AVD 20/11/2010 15% 10% 5% Scale 2 $100 1.5% 2.25% 3% 3.75% 4.25% 27/10/2012 20% 15% 10% 15% 0.25% 0.25% 0.5% 1% 1% Same as AVD (Scale 2) 4.25% 0.2% $5 Question 5 (21 marks) Mr Si is a Hong Kong permanent resident (HKPR). He did not hold any residential property in Hong Kong before the year of assessment 2020/21. (a) During the year of assessment 2020/21, the following transactions took place: (1) On 1 June 2020, Mr Si and his wife, Mrs Si entered into an Agreement for Sale and Purchase to acquire a residential property in Wanchai for a consideration of $12m. Mrs Si is not a HKPR and did not hold any residential property in Hong Kong. Each of Mr Si and Mrs Si acted on his/her behalf in acquiring the property. On conveyance, they added in Ms Tam, the sister of Mrs Si as joint owner of the property. Ms Tam is not a HKPR and she did not hold any residential property in Hong Kong. The seller of the residential property, Mr Cheung purchased the property on 10 February 2020. (8 marks) (ii) On 13 January 2021, Mrs Si entered into an Agreement for Sale and Purchase to acquire a carpark of a residential building at Kwun Tong for a consideration of $1.8m (3 marks) On 1 February 2021, Mr Si transferred a residential property in Shatin of market value of $9m to his daughter as a wedding gift. Mr Si inherited the property from his father 10 years ago. (2 marks) Required: For each of the transactions above, explain the charge of stamp duty according to the Stamp Duty Ordinance. Calculate the amount of stamp duty payable, and state the instruments to be stamped as well as the administrative procedure and other documents that are required (if applicable). (b) Mr Si started a small trading business three years ago and he was recently asked by the Assesso of the Inland Revenue Department to provide the business records related to the year of assessment 2018/19. When Mr Si reviewed those records before submission to the Assessor, he found that he has understated business income of $150,000 and also omitted the claim for donation of $30,000 to the World Vision. Mr Si remembered he only relied on his bookkeeper to prepare the profits tax return of 2018/19 and did not check the information before signing the form for submission to the Inland Revenue Department. Required: (1) Advise Mr Si of his right of action, if any, to correct the omission of claim for donation for its profits tax return of 2018/19. (3 marks) Assuming that there is no involvement of tax evasion for the understatement of income in the profits tax return of 2018/19, advise Mr Si of the possible penalty and prosecution action (if any) that could be taken by the Inland Revenue Department. (5 marks) (Total marks: 21) All monetary figures shown in the question paper are Hong Kong dollars unless specifically indicated otherwise. The following tax rates and allowances are to be used in answering the questions: Rates and allowances - Year of assessment 2020/21 onwards Profits tax rate Corporation First $2,000,000 Remainder Unincorporated business First $2,000,000 Remainder Salaries tax progressive rate First $50,000 Next $50,000 Next $50,000 Next $50,000 Remainder Standard rate Property tax rate (Standard) Personal allowances Basic allowance Married person's allowance Child allowance: First to ninth child (each) Additional allowance in the year of birth (each) Dependent parent allowance - basic* - additional* Dependent parent allowance (aged 55-59) - basic - additional 8.25% 16.5% 7.5% 15% 2% 6% 10% 14% 17% 15% 15% $ 132,000 264,000 120,000 120,000 50,000 50,000 25,000 25,000 Conveyance and Agreement for sale Ad Valorem Stamp Duty (AVD) (Marginal reliefs ignored) Not exceeding $2,000,000 Not exceeding $3,000,000 Not exceeding $4,000,000 Not exceeding $6,000,000 Not exceeding $20,000,000 Exceeding $20,000,000 Stamp duty rates Residential properties, effective 5 Nov 2016 Non-residential properties, effective 26 Nov 2020 Special Stamp Duty Holding period Not exceeding 6 months > 6 months and ≤ 12 months > 12 months and ≤ 24 months > 12 months and ≤ 36 months Buyer's Stamp Duty Lease Rent: Lease with uncertain term Lease with term of less than 1 year Lease with term of 1 year to 3 years Lease with term of more than 3 years Exceeding 3 years Premium (without rent) Premium (with rent) Hong Kong Stock Transfer Contract notes Instrument of transfer with effect from 23/2/2013 Scale 1 1.5% 3% 4.5% 6% 7.5% 8.5% 15% flat rate Scale 2 AVD 20/11/2010 15% 10% 5% Scale 2 $100 1.5% 2.25% 3% 3.75% 4.25% 27/10/2012 20% 15% 10% 15% 0.25% 0.25% 0.5% 1% 1% Same as AVD (Scale 2) 4.25% 0.2% $5 Question 5 (21 marks) Mr Si is a Hong Kong permanent resident (HKPR). He did not hold any residential property in Hong Kong before the year of assessment 2020/21. (a) During the year of assessment 2020/21, the following transactions took place: (1) On 1 June 2020, Mr Si and his wife, Mrs Si entered into an Agreement for Sale and Purchase to acquire a residential property in Wanchai for a consideration of $12m. Mrs Si is not a HKPR and did not hold any residential property in Hong Kong. Each of Mr Si and Mrs Si acted on his/her behalf in acquiring the property. On conveyance, they added in Ms Tam, the sister of Mrs Si as joint owner of the property. Ms Tam is not a HKPR and she did not hold any residential property in Hong Kong. The seller of the residential property, Mr Cheung purchased the property on 10 February 2020. (8 marks) (ii) On 13 January 2021, Mrs Si entered into an Agreement for Sale and Purchase to acquire a carpark of a residential building at Kwun Tong for a consideration of $1.8m (3 marks) On 1 February 2021, Mr Si transferred a residential property in Shatin of market value of $9m to his daughter as a wedding gift. Mr Si inherited the property from his father 10 years ago. (2 marks) Required: For each of the transactions above, explain the charge of stamp duty according to the Stamp Duty Ordinance. Calculate the amount of stamp duty payable, and state the instruments to be stamped as well as the administrative procedure and other documents that are required (if applicable). (b) Mr Si started a small trading business three years ago and he was recently asked by the Assesso of the Inland Revenue Department to provide the business records related to the year of assessment 2018/19. When Mr Si reviewed those records before submission to the Assessor, he found that he has understated business income of $150,000 and also omitted the claim for donation of $30,000 to the World Vision. Mr Si remembered he only relied on his bookkeeper to prepare the profits tax return of 2018/19 and did not check the information before signing the form for submission to the Inland Revenue Department. Required: (1) Advise Mr Si of his right of action, if any, to correct the omission of claim for donation for its profits tax return of 2018/19. (3 marks) Assuming that there is no involvement of tax evasion for the understatement of income in the profits tax return of 2018/19, advise Mr Si of the possible penalty and prosecution action (if any) that could be taken by the Inland Revenue Department. (5 marks) (Total marks: 21)

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ai Acquisition of residential property in Wanchai by Mr Si and Mrs Si Consideration 12000000 Scale 1 ... View the full answer