dipn16_salary tax_benefits

A liability test contained in subparagraph iv to

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Unformatted text preview: was amended to accord with the Department’s pre-Glynn assessing practice in respect of fringe benefits. A “liability test”, contained in subparagraph (iv) to section 9(1)(a), was introduced to exclude from chargeability any benefit where the relevant payment is one for which the employer has the sole liability. The exclusion does not apply to any payment made by an employer to discharge a liability of an employee and, as previously, such a payment would normally be chargeable to Salaries Tax as a perquisite. 15. The exclusion provided by section 9(1)(a)(iv) is subject to section 2 9(2A) , which ensures that convertible benefits and education benefits remain chargeable to Salaries Tax, even if it can be argued that the employer has the liability for the relevant payment. 4 16. Two definitions were added to section 9(6)3 of the Ordinance. A definition of “child of an employee”, along the lines used in Part V of the Ordinance, has been inserted for the purposes of the provision concerning the taxation of education benefits. The second definition is of “employee” and this has been defined to include a holder of an office. This latter definition has been included to make it clear that the exclusion of benefits from chargeable income by section 9(1)(a)(iv) applies to an employee and an office holder. Further, the definition ensures that accommodation benefits provided to office holders are chargeable to the same extent as those provided to employees. 17. Section 8(2)(g) of the Ordinance has been amended to confirm that the exemption from Salaries Tax in respect of amounts arising from educational endowments applies only for the benefit of the person receiving the relevant education. This is to preclude any argument that an education benefit, provided by an employer in respect of a child of an employee, is not chargeable income of the employee by virtue of section 8(2)(g). TREATMENT OF PARTICULAR BENEFITS 18. Set out below are details of how the Department views the taxation position of various categories of non-cash fringe benefits derived by employees and office holders from their employers or others. As the particular arrangements under which fringe benefits are provided can have a bearing on the taxation consequences, the examples provided are in broad terms only. It must be stressed that whilst the Department recognizes and accepts that employment packages may legitimately be structured in a variety of ways, action will be taken in respect of blatant or contrived tax avoidance arrangements. In the latter regard, it is relevant that section 61A of the Ordinance provides that, in broad terms, where it is concluded that a transaction has been entered into for the sole or dominant purpose of obtaining a tax benefit, an assessment may be made in a manner appropriate to counter the tax benefit. Furthermore, section 61 of the Ordinance provides for artificial or fictitious transactions and dispositions to be disregarded. However, in relation to the examples below it has been assumed tha...
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