3. Salaries Tax 1

3. Salaries Tax 1 - BUSI0018 HK Taxation Tutorial notes on...

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BUSI0018 – HK Taxation Tutorial notes on Salaries Tax (1) – HK employment or non-HK employment? s8(1) Scope of Charge of Salaries Tax Salaries tax shall be charged for each year of assessment on every person in respect of his income arising in or derived from HK from the following sources: Any office (擔擔擔擔擔擔擔擔擔擔) or employment of profit (擔擔擔擔); and s8(1)(a) any pension (擔擔擔) s8(1)(b) s9 Definition of Income According to section 9 of the IRO, income from any office or employment includes: wages 擔擔 salaries 擔擔 leave pay 擔擔 fees 擔擔 commissions 擔擔 bonuses 擔擔 gratuities 擔擔 perquisites 擔擔(including all incidental emoluments e.g. fringe benefits derived from employment, such as utility and telephone charges which are paid by an employer) allowances 擔擔 All the above items are taxable whether they are received by the taxpayer from his/her employer or from another person, provided that they arise from the taxpayer’s office or employment . Source of Income from Employment A taxpayer’s income is only assessable to salaries tax if it has a HK source ; that is, if it arose in or was derived from H.K. [s8(1)]. Following the case of CIR v George Andrew Goepfert (1987) , the IRD in DIPN 10 has indicated that it will generally accept that employment is located outside HK if : 1. The contract of employment is negotiated , entered into and enforceable outside HK 2. The employer is resident outside HK; and 3. The employee’s remuneration is paid outside HK 1
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However, most importantly, we should look at the “Totality of Facts 擔擔擔擔”. That means, all the relevant facts and circumstances should be examined to ascertain whether it is a HK employment or non-HK employment. CIR v Goepfert case (1987) The taxpayer was employed by a United States corporation and was seconded to a corporation in HK . During the year of assessment in question the taxpayer had rendered 41 days’ service outside HK . The Commissioner assessed the taxpayer to salaries tax on his entire salary . The taxpayer claimed, however, that he should not have been charged to salaries for the period spent outside HK. [ The High Court in Goepfert found that the place where a taxpayer performs his/her services is not relevant to the question of income source . [ It is the location of a taxpayer’s employment in HK that gives rise to tax liability. If the employment of a person is located in HK (i.e. a HK employment), the income is caught by s8(1) [ The full income from employment derived by that person during the year of assessment is chargeable to salaries tax even though he has rendered some of his duties outside HK unless he satisfies the condition set out in s8(1B) or s8(1A)(c) (discussed in later parts) 1. Location of employment contract It is the place where the contract was negotiated and entered into, NOT the place where the taxpayer fulfils its terms It must be determined whether the contract
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This note was uploaded on 02/23/2012 for the course BUSI 0018 taught by Professor C.ng during the Spring '11 term at HKU.

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3. Salaries Tax 1 - BUSI0018 HK Taxation Tutorial notes on...

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