Dennis Dan has been transferred from a German parent company to work for its subsidiary in...

  

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Dennis Dan has been transferred from a German parent company to work for its subsidiary in Hong Kong, Dragonet Limited (Dragonet), as the Chief Finance Manager under a two-year contract commencing 1 April 2021. Whilst his employment contract was negotiated and concluded in Germany, his salary would be paid into his bank account in Hong Kong. Dennis stayed the following places during the year of assessment 2021/22: Hong Kong Germany Korea (on vacation) 320 30 15 365 Dennis and his wife, Debbie Dan who is a housewife, provided you with the following information relating to their financial affairs for the year ended 31 March 2022: (i) Dennis' annual salary and bonus amounted to $900,000 (excluding the rental allowance as mentioned in (ii) below). (ii) After he joined Dragonet, the accountant told Dennis that he could structure his remuneration package in whatever manner he wishes. Dennis took his advice and designated $40,000 of his monthly pay as rental allowance with effect from 1 April 2021. However there is no written tenancy agreement between Dragonet and Dennis. (iii) Dragonet provides Dennis with a new car (cost $450,000) in the company's title, which he uses for private and business purposes on a 60:40 basis. (iv) Dragonet also provides him with a petroleum card taken out in the company's name. Dennis charges all his petrol expenditure amounting $20,000 to this card. (v) Dragonet paid for the annual membership fee of $48,000 for Dennis' personal club membership with the Hong Kong Golf Club. Dennis regularly used the club facilities to entertain his own family members as well as Dragonet's staff members. (vi) Dragonet reimbursed Dennis $42,000 for his total entertainment expenditure at the club (see (v) above) upon production of receipts. This comprised of $17,000 private entertainment expenses, whereas the remaining $25,000 related to Dragonet's staff entertainment. (vii) Dennis contributed 5% of his total salary and bonus to the Mandatory Provident Fund Scheme, and Dragonet contributed another 5% to the Scheme. (viii)Dennis' elderly mother (aged 62) was living together with him until she suddenly became ill in October 2021. Dennis was forced to put her in a nursing home for full-time medical care. The residential care expense of $80,000 was paid to the nursing home. (ix) Dennis and Debbie have two children aged 28 and 23: The elder daughter is a full-time master student at Hong Kong Baptist University. She lived at the university during the year, and was employed as a part-time teaching assistant at a monthly salary of $12,000. -The younger son was studying full time in the University of Berlin until he graduated in February 2022. He is now seeking for a job offer. Required: (a) Discuss how Dennis would be chargeable to Hong Kong salaries tax. (10 marks) (b) Compute Dennis and Debbie's total tax liabilities for the year of assessment 2021/22. Ignore provisional tax and any one-off tax reduction for 2021/22. (10 marks) (c) Comment specifically upon the tax treatments you have accorded to the various issues raised in items (ii) to (vi). Dennis Dan has been transferred from a German parent company to work for its subsidiary in Hong Kong, Dragonet Limited (Dragonet), as the Chief Finance Manager under a two-year contract commencing 1 April 2021. Whilst his employment contract was negotiated and concluded in Germany, his salary would be paid into his bank account in Hong Kong. Dennis stayed the following places during the year of assessment 2021/22: Hong Kong Germany Korea (on vacation) 320 30 15 365 Dennis and his wife, Debbie Dan who is a housewife, provided you with the following information relating to their financial affairs for the year ended 31 March 2022: (i) Dennis' annual salary and bonus amounted to $900,000 (excluding the rental allowance as mentioned in (ii) below). (ii) After he joined Dragonet, the accountant told Dennis that he could structure his remuneration package in whatever manner he wishes. Dennis took his advice and designated $40,000 of his monthly pay as rental allowance with effect from 1 April 2021. However there is no written tenancy agreement between Dragonet and Dennis. (iii) Dragonet provides Dennis with a new car (cost $450,000) in the company's title, which he uses for private and business purposes on a 60:40 basis. (iv) Dragonet also provides him with a petroleum card taken out in the company's name. Dennis charges all his petrol expenditure amounting $20,000 to this card. (v) Dragonet paid for the annual membership fee of $48,000 for Dennis' personal club membership with the Hong Kong Golf Club. Dennis regularly used the club facilities to entertain his own family members as well as Dragonet's staff members. (vi) Dragonet reimbursed Dennis $42,000 for his total entertainment expenditure at the club (see (v) above) upon production of receipts. This comprised of $17,000 private entertainment expenses, whereas the remaining $25,000 related to Dragonet's staff entertainment. (vii) Dennis contributed 5% of his total salary and bonus to the Mandatory Provident Fund Scheme, and Dragonet contributed another 5% to the Scheme. (viii)Dennis' elderly mother (aged 62) was living together with him until she suddenly became ill in October 2021. Dennis was forced to put her in a nursing home for full-time medical care. The residential care expense of $80,000 was paid to the nursing home. (ix) Dennis and Debbie have two children aged 28 and 23: The elder daughter is a full-time master student at Hong Kong Baptist University. She lived at the university during the year, and was employed as a part-time teaching assistant at a monthly salary of $12,000. -The younger son was studying full time in the University of Berlin until he graduated in February 2022. He is now seeking for a job offer. Required: (a) Discuss how Dennis would be chargeable to Hong Kong salaries tax. (10 marks) (b) Compute Dennis and Debbie's total tax liabilities for the year of assessment 2021/22. Ignore provisional tax and any one-off tax reduction for 2021/22. (10 marks) (c) Comment specifically upon the tax treatments you have accorded to the various issues raised in items (ii) to (vi).

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a Dennis would be chargeable to Hong Kong salaries tax on his employment income which includes his s... View the full answer