Ans 5. Salaries 3

Ans 5. Salaries 3 - BUSI 0018 Hong Kong Taxation Tutorial...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
TA_U5_SalariesTax(3) 1 BUSI 0018 – Hong Kong Taxation Tutorial Questions Unit 5 – Salaries Tax (3) Answer 12(a) The rules governing the deduction of outgoings and expenses are contained in IRO S12(1)(a) which allows “all outgoings and expenses, other than expenses of a domestic or private nature and capital expenditure, wholly, exclusively and necessarily incurred in the production of the assessable income”. This means that to be deductible, the expenditure must satisfy each of the following tests in addition to not being expenditure of a domestic or private nature or expenditure of a capital nature. 1. it must have been ‘incurred’, 2. ‘wholly, exclusively’ and 3. ‘necessarily’ 4. in the production of the income. The ‘incurred’ test means that the expenditure must either be paid or have given rise to an established liability or a definite commitment arising in the year in which the deduction is claimed. If payment has not been made, it is allowed only when an actual and known liability or obligation of ascertainable amount existed on the last day of that year. The ‘wholly and exclusively’ test means that the entire amount must have been expended for the sole purpose of producing the income. But, in practice, expenditure incurred for more than one purpose would be apportioned and the part attributable to the employment will be allowed, provided the other tests are satisfied, e.g. depreciation allowance and petrol. The "necessarily" test means that the expenditure must be essential to the conduct of the employment, i.e. vital to the employment to the extent that it would not be possible for the taxpayer to perform the duties and to produce the income from the employment without incurring that expenditure. "In the production of income" is considered to be the same as the meaning of the phrase "in the performance of duties". Expenditure is not incurred in the production of income if it is only incurred to enable the duties to be performed e.g. travelling to and from the place of employment ( CIR v Humphrey ).
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
TA_U5_SalariesTax(3) 2 Answer 12(b) Mr. Chan's claim must be considered under Section 12(1)(a) which allows deductions for expenses incurred wholly, exclusively and necessarily in the production of assessable income. However, expenses of a private, domestic or capital nature are not deductible. 1. Membership subscription Strictly speaking, the expense is not incurred in the production of assessable income and thus not deductible. However, the IRD's practice is to allow deduction of one professional membership subscription if the holding of a professional qualification is
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 6

Ans 5. Salaries 3 - BUSI 0018 Hong Kong Taxation Tutorial...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online