Peter is employed as the Regional Marketing Manager of M&M Limited, a Hong-Kong listed company incorporated and
Question:
Peter is employed as the Regional Marketing Manager of M&M Limited, a Hong-Kong listed company incorporated and carrying on a trading business in Hong Kong with several offices over the South-east Asia. The following are facts related to Peter for the year of assessment 2018/19:
1. M&M Limited paid Peter $910,000 as salary and commission. M&M Limited also reimbursed to Peter $30,000 as part of his private and domestic spending.
2. On 1 April 2018, Peter was granted an option to buy 20,000 shares of a subsidiary of M&M Limited at $6 each within 2 years. He held the option till expiry and did not exercise it. Market values per share on various dates were as follows:
• 1 April 2018 ..............$10
• 31 March 2019.......... $11
• 31 March 2020..........$5 3
3. Peter's only child, aged 19, is studying full-time in Australia. According to the employment contract, M&M Limited has paid the school fees of $160,000 (HKD equivalent) directly to the school in Australia during the year of assessment.
4. M&M provided Peter with a free accommodation of an apartment in Kowloon (M&M paid monthly rental to the landlord: $45,000). Peter lived there with his wife, Mary, who holds neither an office nor employment in Hong Kong. In her leisure time, Mary likes bakery and she earned profits of $9,800 in the year of assessment for selling out cookies to neighbours and friends.
5. Other expenditures of Peter's during the year are as follows:
a. Annual subscription fee to Institute of Marketing: $2,450
b. Donation: $60,000 paid to buy toys donated to an approved charity
c. Employee's contribution to Mandatory Provident Fund (MPF): $18,000
6. Unless otherwise stated, no payments made by Peter were reimbursed by M&M Limited.
Mary did not file any tax return for 2018/19 for her profits earned for selling cookies. Mary later received a notice of estimated assessment for 2018/19. She believes that she should not be subject to any tax as she made cookies just because she likes bakery and she has no profit-seeking intention. So, she intends to ignore the estimated assessment.
Required:
(a) Prepare the salaries tax computation to calculate Peter's salaries tax liability for the year of assessment 2018/19.
(b) Advise Mary the likely consequences if she ignores the estimated assessment and does not pay the tax on due date.
Expert Answer:
a salary and commission21082019 910000 x 2 1820000 b private and domestic spe... View the full answer
