Mrs. Jones is a US Citizen who came to Hong Kong for a vacation in January 2019. Before She went back to the US in February 2019, she acquired an office in Hong Kong and leased it out for rental. The acquisition price of the office was HK$20 million, 50% of which was financed by Mrs. Jones’ surplus cash, and the balance was financed by a low-interest loan (with 20-year repayment terms) provided by her employer who carries on business in the US. This was the first time Mrs. Jones buying a property in Hong Kong. The leasing agreement was handled by a property agent in Hong Kong. The office was rent out for a term of two years and the rental income is to be directly deposited by the tenant into Mrs. Jones’ bank account in the US. In November 2019, Mrs. Jones advised her property agent that she had resigned from her current employment and asked the property agent to list the office for sale, aiming to make a gain of HK$2 million. She sold the property in December 2019 and made a gain of $2.2 million.

Discuss the factors which need to be considered in determining whether Mrs. Jones will be subject to Hong Kong profits tax in respect of the gain made on the sale and give an opinion on whether this will/will not be the case.

Answer rating: 100% (QA)

According to the Inland Revenue Ordinance of Hong Kong Mrs Joness property is subjected to various taxes under its provisions Section 5 of the ordinan... View the full answer