Reference no: EM132820665
Question - John Jones is employed by RA Corporation, a large international corporation based in the Australia. According to his employment contract, which is enforceable in the Australia, John's duties are performed exclusively to oversee and supervise operations of the various affiliated companies of RA Corporation in the South East Asia region. John's salary is paid in Australia dollars into his bank account in the Sydney. However, for convenience purposes, most of his work is performed in Hong Kong. John's travelling schedule for the year ended 31 March 2019 was as follows:
Australia 40 days (including 15 days annual leave)
Hong Kong 175 days
PRC 100 days
Korea 20 days
Japan 30 days
365 days
In relation to the year ended 31 March 2019, John had the following income and expenditure (all amounts are denominated in Hong Kong dollars):
1. Annual salary of $1,200,000.
2. A home-leave travelling allowance of $80,000, of which $65,000 was actually expended for air tickets for home-leave purposes.
3. An entertainment allowance of $100,000.
4. RA Corporation provides John with a car for his use in Hong Kong. The market value of the car was $200,000 and the second hand value as at 31 March 2019 was $150,000. John also received a petrol cost allowance of $1,000 per month.
5. RA Corporation operates a medical insurance scheme for all its employees through an insurance company called BUPA. During the year, John became seriously ill and was hospitalised for one month. In order that he could continue to carry out his employment duties whilst in hospital, he paid an extra $60,000 for a private room. Of which $35,000 were reimbursed by BUPA as the basic hospital fees and public ward fees of his medical scheme, while the remaining fees for the private room were reimbursed by RA Corporation.
6. RA has set up an educational trust. The trustee made a grant of $164,000 to John's son who is studying in Canada.
7. Upon recommendation of a director, John successfully joined the Hong Kong Jockey Club with effect from 1 October 2018. He paid an annual subscription of $36,000 and obtained a reimbursement of half of this amount from RM Corporation. John often met with the directors and with clients in the Club.
8. During the year, RA Corporation received and paid the following tax bills in respect of John:
Hong Kong salaries tax $150,000
PRC individual income tax $160,000
Other countries' income tax $40,000
Required -
a) Based on the information provided, determine whether John is subject to salaries tax in Hong Kong in respect of the employment income he received from the RA Corporation for the years of assessment 2018/19 and if yes, on what basis. Briefly explain.
b) Compute the assessable income of John Jones, if any, for the year ended 31 March 2019, giving explanations of the treatment you have accorded for tax purposes to items (6) and (8) above.