ACCT 3161 Homework Assignment 2
Prof. Xinyuan Shao
Term 2 2023-2024
1. Identify which of the following statements best summarizes the charge to profits tax. (4 points)
A. Profits tax is a general tax on corporate profits, and is charged on corporations carrying on a trade
or business in Hong Kong.
B. Profits tax is a tax on business income and is charged on persons deriving Hong Kong source
profits and carrying on a trade, profession or business in Hong Kong.
C. Profits tax is a tax on Hong Kong source income, chargeable in the hands of persons carrying on a
trade or business in Hong Kong, irrespective of their jurisdiction of tax residence.
D. Profits tax is charged on Hong Kong source profits arising from a trade, profession or business
carried on in Hong Kong.
2. Which of the following(s) are of revenue nature and taxable? (4 points)
Hint: more than one answers may be correct.
A. Compensation received for permanent loss of a capital asset.
B. Compensation received for cancellation of the sole sale contract.
C. Compensation received for temporary loss of a capital asset.
D. Compensation received for cancellation of a sale contract from one of the business partners.
3. What is the allowable deduction for home loan interest under salaries tax in Hong Kong?
(4 points)
A. It is deductible for up to 5 years
B. It is deductible for up to 15 years
C. It is deductible for up to 20 years
D. There is no time limit for the deduction
4. Which allowance CANNOT be combined with the single parent allowance under the
salaries tax provisions in the IRO? (4 points)
A. Child allowance
B. Married person allowance
C. Basic allowance
D. Dependent parent allowance
5. Which of the following is the requirement for claiming the additional dependent parent
allowance under salaries tax? (4 points)
A. The dependent must be residing with the taxpayer for the full year.
B. The dependent must be resident of Hong Kong.
C. The taxpayer must have provided financial support to the dependent.
D. The dependent must be at least 65 years old.
6. Mr. Linton is the Chief Accountant with a Hong Kong company, Apex Innovations Limited
('Apex'). He has provided the following information relating to the year ended 31 March 2024:
His annual salary was $2,240,000. He paid a nominal $3,000 to Apex per month for living in the
staff residence provided by the employer. He also received a bonus of $65,000 during the relevant
period from Apex for his outstanding performance.
On 31 May 2023, he received option grants from Apex (with value $20,000 evaluated by financial
experts). He exercised part of the options on 10 October 2023 and realized the gain of $30,000. He
sold the other options to a friend Sam for the value of $10,000 on 15 January 2024.
He contributed the mandatory amount (not voluntary contribution) of $30,000 to the MPF.
He is married with his wife, Nancy and they have a son, aged 6. Nancy gave birth to a baby
daughter on 11 November 2023. Nancy’s employment is with a company in Shenzhen and does
not provide any services in Hong Kong during the year. They have been living together with Mr.
Linton’s father (age 68) and mother (age 65) from 1 July 2022 to 30 June 2024.
Required
(a) Compute the salaries tax liability for the married person if joint assessment is elected the
year of assessment 2023/24. (25 points)
(b) Briefly explain the eligibility and rationale for electing joint assessment in this specific
case (5 points)
