Question 3 (13 marks)

Jason is an IT engineer employed by Blockchain Ltd. ("Blockchain"), which is carrying on

cryptocurrency business in Hong Kong. Jason has a plan that he will terminate his existing

employment contract with Blockchain and incorporate a self-owned Hong Kong company

("Service Co."), which will enter into an IT service agreement with Blockchain.

Under the IT service agreement, Jason will provide IT consultancy services to Blockchain in

the capacity of Service Co. 's employee. An annual fee will be payable by Blockchain to Service

Co. at an amount equivalent to Jason's annual salary under the existing employment contract

with Blockchain. The fee will be payable on a monthly basis through bank transfer. Jason will

be entitled to the staff discount on purchasing cryptocurrency from Blockchain. As an

employee of Service Co., Jason receives accommodation and other fringe benefits from Service

Co.

Required:

Regarding the arrangement proposed by Jason, evaluate and comment whether s.9A of the

Inland Revenue Ordinance is applicable to the relationship between Blockchain and Jason, and

the consequences if this section is applicable.

(Total for Question 3: 13 marks)