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03 Salaries Tax - Scope of charge & sources of income -s

03 Salaries Tax - Scope of charge & sources of...

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1 Unit 3 Salaries Tax: Scope of Charge and Sources of Income
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2 LEARNING OBJECTIVES After this lecture, you should be able to: Name the three sources of income Distinguish the main and the extended charging section Determine the source of income from employment, office and pension List the tax implication
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3 Scope of charge 1.1 Basic charge Section 8(1) of IRO: Salaries tax is charged For each year of assessment On every person (individual) In respect of income arising in or derived from Hong Kong from Office ( ) Employment of profits ( ), or Pension ( )
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4 Implication of s 8(1) (a)Chargeable income is derived from: Office; Employment; and Pension. (b)Chargeable income must be: arising in or derived from Hong Kong
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5 Implication of s 8(1) (c)Chargeable persons are: Office holders; Employees; Pensioners; Regardless of domicile( ), residence status, nationality (d)Chargeable period is : Every 1 April to 31 March of next year ;
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6 Salaries income The whole income is assessable Unless specifically exempt – s.8(1A)(b) & (c), s.8(2)
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7 1.2 Extended charge Section 8(1A): For employment sourced outside Hong Kong - foreign employment Only in respect of services rendered in Hong Kong, including leave pay ( ) attributable to such services – s8(1A)(a): see Examples 2 & 3, pp. 20 Common basis applied – time apportionment (time-in-time-out basis), i.e. No. of days in Hong Kong in year of assessment / No. of days of foreign employment in the year of assessment Unless specifically exempt – s8(1A)(b) & (c), s8(2)
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8 Implication of s 8(1A)(a) 1. income from foreign sourced employment is chargeable to HK tax 2. leave pay attributable to services rendered in Hong Kong from foreign sourced employment is also chargeable 3. taxable income is ascertained on a time apportionment basis (to discuss later)
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9 1.3 Office vs Employment Different rules apply to determine the source of income Exclusion of income under s8(1A)(b) & (c) apply to employment only - see Unit 4 . Inclusion of income under s8(1A)(a) also apply to employment only.
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10 1.4 Definition of Office: A subsisting( ), permanent and substantive( ) position, which has an existence independent of the person who fills it, and which goes on and is filled by successive holders. ( Great Western Railway Co. V. Bater (1922)) E.g. director, company secretary, Financial Secretary
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11 1.5 Definition of Employment:
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