Unit 5 - U5_Salaries_3 1 THE UNIVERSITY OF HONG KONG SCHOOL...

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Unformatted text preview: U5_Salaries_3 1 THE UNIVERSITY OF HONG KONG SCHOOL OF BUSINESS BUSI 0018 – Hong Kong Taxation Unit 5 – Salaries Tax (3) Coverage 1 Computation of NCI - S12B 2 Deductions from assessable income (AI) - Outgoings and expenses 3 Deductions from AI - Depreciation allowances for capital expenditure 4 Deductions from AI - Losses 5 Deductions from AI - Self-education expenses 6 Concessionary deductions under Part IVA - Approved charitable donations S26C - Elderly residential care expenses S26D - Home loan interest S26E - Contributions to recognised retirement schemes S26G 7 Allowances under Part V 8 Calculation of salaries tax - S13 Learning Objectives After completing this unit, you should be able to: - identify the deductions allowed against the assessable income - explain the rules governing the deduction of outgoings and expenses - explain the allowances for capital expenditure - describe how losses arise and how they can be relieved - explain the conditions for claiming approved charitable donations, elderly residential care expenses, home loan interest and contributions to retirement schemes - explain the conditions for claiming various personal allowances - compute net assessable income, net chargeable income and salaries tax liability of a taxpayer U5_Salaries_3 2 1 COMPUTATION OF NCI – S12B Assessable Income (AI) – S11B A Less: Outgoings and expenses – S12(1)(a) X Depreciation allowance – S12(1)(b) X Loss b/f – S12(1)(c) X Loss transferred from other spouse – S12(1)(d) X (only applies to joint assessment) Self-education expenses – S12(1)(e) X Add: Balancing charge – S12(5) X Net Assessable Income (NAI) – S12 B (aggregate income of husband & wife if joint assessment is elected) Less: Concessionary deductions under Part IVA: Approved charitable donation – S26C X Elderly residential care expenses – S26D X Home loan interest – S26E X Contributions to RRS – S26G X C Less: Personal allowances under Part V D Net Chargeable Income (NCI) E 2. DEDUCTIONS FROM ASSESSABLE INCOME – Outgoings and Expenses 2.1 Outgoings and Expenses – S.12(1)(a) • Not domestic, private or capital • Wholly, exclusively and necessarily incurred in the production of AI 2.2 "Incurred" • Actual payment, or • An established liability or a definite commitment of ascertainable amount • Contrast with: - a mere contingent liability or an anticipated future outgoing - provision for expenses 2.3 "Wholly and Exclusively" • Entire amount • For the sole purpose of producing assessable income • If for dual purpose and amount is separable and identifiable, apportionment may be allowed in practice U5_Salaries_3 3 2.4 “Necessarily” • Essential to the conduct of employment • Not sufficient that the expenditure is related to and aid the production of income • Test: - "Whether the expenditure is so vital that it would not be possible to produce the income without incurring that expenditure" • Expenses required to be incurred by employer...
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Unit 5 - U5_Salaries_3 1 THE UNIVERSITY OF HONG KONG SCHOOL...

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