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Unformatted text preview: U3_Salaries_1_0809 08/09 1 THE UNIVERSITY OF HONG KONG SCHOOL OF BUSINESS BUSI 0018 – Hong Kong Taxation Unit 3 – Salaries Tax (1) Coverage 1 Scope of charge 2 Source of income 3 Basis period and assessable income 4 Exemptions Learning Objectives After completing this unit, you should be able to: • identify the chargeable person and scope of charge to salaries tax • explain the meaning of office, employment and pension • explain the basic charge and extended charge to salaries tax • explain the different source rules applicable to employment, office and pension • apply the source rules to determine the source of income • explain the basis period and the basis to determine assessable income • describe the exemptions available under salaries tax 1 SCOPE OF CHARGE 1.1 Basic charge • Section 8(1) of IRO • For each year of assessment • On every person • In respect of income arising in or derived from Hong Kong from - office - employment of profits, or - pension • Whole income is assessable • Unless specifically exempt – S.8(1A)(b) & (c), S.8(2) 1.2 Extended charge • Section 8(1A)(a) • For employment sourced outside Hong Kong • Only in respect of income from services rendered in Hong Kong, including leave pay attributable to such services – S.8(1A)(a) • Common basis applied – time-apportionment • Unless specifically exempt – S.8(1A)(b), S.8(2) U3_Salaries_1_0809 08/09 2 1.3 Office vs Employment • Different rules apply to determine source of income • Extended charge under S.8(1A)(a) apply to employment only • Exemption under S.8(1A)(b) & (c) also apply to employment only 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) • e.g. director, company secretary, Financial Secretary 1.5 Definition of Employment • Employment exists where there is a legal relationship of master and servant • Test: is the servant answerable to the master for - What he does - How he does it - Where he does it - When he does it? • Relationship is bound by a contract of service 1.6 Contract of Service vs Contract for Service Contract of service Contract for service An employment A business Master and servant relationship Principal to principal relationship Subject to salaries tax Subject to profits tax • A question of facts determined on each case • General rule to distinguish: - “Is the person who has engaged himself to perform these services performing them as a person in business on his own account?” (Fall v Hitchen) • Factors to consider: ♦ Control test: - Degree of control?...
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- Spring '12
- Taxation in the United States, Mainland China