Question 3-55 marks Mr Egger is employed by Genie (HK) Ltd (Genie HK) as the financial...

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Question 3-55 marks Mr Egger is employed by Genie (HK) Ltd ("Genie HK") as the financial controller. The company is incorporated and carries on business in Hong Kong. Mr Egger is a US citizen. He negotiated and concluded the employment contract in the US and his remuneration was paid directly to his bank account in the US. During the year ended 31 March 2021, Mr Egger made the following trips (all were business in nature): Mainland China Singapore Europe 85 days 30 days 15 days You have been supplied with the following information for the year ended 31 March 2021: 1. 2. 3. 4. Salary: $1,200,000 Mr Egger rented a 2-room flat in Pok Fu Lam for his residence at a monthly rent of $30,000. His employer refunded $26,000 per month to him. The rateable value of the flat for the year was $350,000. Genie HK provided him with a company car for his own use. The car was leased by the company at an annual rent of $180,000. Mr Egger used the car wholly for private use. Mr Egger spent $19,000 on fuel and Genie reimbursed the whole amount to him. In August 2020, Mr Egger took a 10-day business trip to Europe. Mrs Egger travelled with him for sightseeing, and Genie HK has paid at total of $45,000 to the travel agent for Mr and Mrs Egger's round trip tickets, and $25,000 for accommodation. 5. Genie HK has a subsidiary in Singapore called Genie (Far East) Ltd ("Genie Far East"). Genie Far East has appointed Mr Egger as the statutory director. Genie Far East does not carry on business in Hong Kong and all its board of directors' meetings are held in Singapore. During the year ended 31 March 2021, Mr Egger has spent 5 days in Singapore to attend the board of directors' meeting of Genie Far East. Mr Egger received $220,000 from Genie Far East as directors' fee during the year. 6. Genie HK has granted a share option to Mr Egger on 1 April 2017. Details of the share option are as follows: Grant date: 7. Vesting period: Option price: Number of shares: Subscription fee paid on 1 April 2017: Expiry date: 1 April 2017 3 years $5 per share 20,000 shares of Genie Far East $3,000 31 March 2026 Mr Egger exercised half of the share option on 15 July 2020, during which the market price on was $18 per share, and he paid a commission of $2,800 to the broker. He subsequently sold the shares exercised on 10 January 2021 at $23 per share, and paid another commission of $2,700 to the broker. He is married with 2 children aged 28 and 20 (both unmarried). The elder son, Peter, is mentally disabled and is not working, and he is eligible for the Hong Kong Government's Disability Allowance Scheme. His second son, Percy, is Page 4 of 8 studying at a university in Australia. His wife is an attorney working in a law firm in New York, and her annual salary during the year was US$250,000. Mrs Egger comes to Hong Kong from time to time to visit Mr Egger and Peter. 8. During the year he paid the following professional membership fees: American Institute of Certified Public Accountants - $2,600 Professional Golf Club - $4,000 9. Mr Egger has enrolled to the EMBA programme offered by Harvard University, and paid the first tuition fee of $180,000 on 15 March 2021. The first lecture commenced on 21 May 2021. 10. Mr Egger's father was 67 years old and his mother was 62 years old during the year ended 31 March 2021. Mr Egger contributed $8,000 per month to his parents. The parents resided in New York with Mr Egger's wife and was maintained by her during 2020/21, and during the year ended 31 March 2021 they visited Hong Kong and stayed at Mr Egger's home in Hong Kong for 3 months. 11. Number of days during the year ended 31 March 2021: 365 days Required: (a) (b) Comment on the source of employment in respect of Mr Egger's employment with Genie (HK) Limited. You need to quote the relevant IRO and/or DIPN. (9 marks) Comment on the taxability of the directors' fee received by Mr Egger from Genie (Far East) Limited. (4 marks) (c) Comment on the taxability of company car provided to Mr Egger and the reimbursement of fuel as per item (3) above. (6 marks) (d) Regarding Mr Egger's overseas trip with his wife as per item (4) above, do you think it is chargeable to salaries tax? Explain. (5 marks) (e) Discuss and explain whether Mr Egger is eligible for married person's allowance and dependent parent allowance during 2020/21. (13 marks) (f) Compute the stock option gain chargeable to salaries tax during 2020/21, and explain whether the sales of share on 10 January 2021 is chargeable to salaries tax (item 6). (8 marks) (g) Based on information provided, compute the rental value for Mr Egger for 2020/21. You should provide proper heading for the computation. (10 marks) Question 3-55 marks Mr Egger is employed by Genie (HK) Ltd ("Genie HK") as the financial controller. The company is incorporated and carries on business in Hong Kong. Mr Egger is a US citizen. He negotiated and concluded the employment contract in the US and his remuneration was paid directly to his bank account in the US. During the year ended 31 March 2021, Mr Egger made the following trips (all were business in nature): Mainland China Singapore Europe 85 days 30 days 15 days You have been supplied with the following information for the year ended 31 March 2021: 1. 2. 3. 4. Salary: $1,200,000 Mr Egger rented a 2-room flat in Pok Fu Lam for his residence at a monthly rent of $30,000. His employer refunded $26,000 per month to him. The rateable value of the flat for the year was $350,000. Genie HK provided him with a company car for his own use. The car was leased by the company at an annual rent of $180,000. Mr Egger used the car wholly for private use. Mr Egger spent $19,000 on fuel and Genie reimbursed the whole amount to him. In August 2020, Mr Egger took a 10-day business trip to Europe. Mrs Egger travelled with him for sightseeing, and Genie HK has paid at total of $45,000 to the travel agent for Mr and Mrs Egger's round trip tickets, and $25,000 for accommodation. 5. Genie HK has a subsidiary in Singapore called Genie (Far East) Ltd ("Genie Far East"). Genie Far East has appointed Mr Egger as the statutory director. Genie Far East does not carry on business in Hong Kong and all its board of directors' meetings are held in Singapore. During the year ended 31 March 2021, Mr Egger has spent 5 days in Singapore to attend the board of directors' meeting of Genie Far East. Mr Egger received $220,000 from Genie Far East as directors' fee during the year. 6. Genie HK has granted a share option to Mr Egger on 1 April 2017. Details of the share option are as follows: Grant date: 7. Vesting period: Option price: Number of shares: Subscription fee paid on 1 April 2017: Expiry date: 1 April 2017 3 years $5 per share 20,000 shares of Genie Far East $3,000 31 March 2026 Mr Egger exercised half of the share option on 15 July 2020, during which the market price on was $18 per share, and he paid a commission of $2,800 to the broker. He subsequently sold the shares exercised on 10 January 2021 at $23 per share, and paid another commission of $2,700 to the broker. He is married with 2 children aged 28 and 20 (both unmarried). The elder son, Peter, is mentally disabled and is not working, and he is eligible for the Hong Kong Government's Disability Allowance Scheme. His second son, Percy, is Page 4 of 8 studying at a university in Australia. His wife is an attorney working in a law firm in New York, and her annual salary during the year was US$250,000. Mrs Egger comes to Hong Kong from time to time to visit Mr Egger and Peter. 8. During the year he paid the following professional membership fees: American Institute of Certified Public Accountants - $2,600 Professional Golf Club - $4,000 9. Mr Egger has enrolled to the EMBA programme offered by Harvard University, and paid the first tuition fee of $180,000 on 15 March 2021. The first lecture commenced on 21 May 2021. 10. Mr Egger's father was 67 years old and his mother was 62 years old during the year ended 31 March 2021. Mr Egger contributed $8,000 per month to his parents. The parents resided in New York with Mr Egger's wife and was maintained by her during 2020/21, and during the year ended 31 March 2021 they visited Hong Kong and stayed at Mr Egger's home in Hong Kong for 3 months. 11. Number of days during the year ended 31 March 2021: 365 days Required: (a) (b) Comment on the source of employment in respect of Mr Egger's employment with Genie (HK) Limited. You need to quote the relevant IRO and/or DIPN. (9 marks) Comment on the taxability of the directors' fee received by Mr Egger from Genie (Far East) Limited. (4 marks) (c) Comment on the taxability of company car provided to Mr Egger and the reimbursement of fuel as per item (3) above. (6 marks) (d) Regarding Mr Egger's overseas trip with his wife as per item (4) above, do you think it is chargeable to salaries tax? Explain. (5 marks) (e) Discuss and explain whether Mr Egger is eligible for married person's allowance and dependent parent allowance during 2020/21. (13 marks) (f) Compute the stock option gain chargeable to salaries tax during 2020/21, and explain whether the sales of share on 10 January 2021 is chargeable to salaries tax (item 6). (8 marks) (g) Based on information provided, compute the rental value for Mr Egger for 2020/21. You should provide proper heading for the computation. (10 marks)