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ACCT 3023 HK Taxation 

Class Work on Unit 1

1. According to the tax law in Hong Kong, there are only three basic tax types: property tax, salaries tax and profits tax.  There are no goods and services tax, no value added tax, no interest tax, no dividend tax, no capital gain tax and so on.  People criticize the base of Hong Kong tax system is narrow and may not be able to raise sufficient revenue for defraying government expenditure.

Comment the base of the Hong Kong tax system and state one method, which can enhance the tax base by taking into consideration of the current concepts of a good tax system.

2. Ms. Wai operated a fashion boutique in Mongkok, Hong Kong, a prime location in the “pedestrian zone”.   A profits tax return was issued to her on 2 April 2021.  She forgot about it until she received an estimated assessment on 15 June 2021.  She was not satisfied with this assessment.

Advise Ms. Wai what she had to do at once; and the consequence after her actions.

3. Donald lodged an objection to the profits tax assessment for 2020/21, which taxed his wholly owned corporation, Donald (Cayman Islands) Inc. on the rental income from a property in Wanchai, Hong Kong.  He argued that it was a corporation established outside Hong Kong.  The tenancy agreement was signed in New York and was enforceable under the law of USA.  The rent (US$2,000) was paid monthly by the American tenant to the corporation’s bank accounts in New York.  He considered the income was derived from outside Hong Kong by a foreign corporation.  The Hong Kong tax department had no right to demand tax on such incomes.

Despite many correspondences were exchanged between Donald and the tax department, the objection was not settled.  Then on 1 November 2021, the Commissioner of Inland Revenue issued a determination to Donald (Cayman Islands) Inc. confirming the tax assessment.

Donald was not satisfied with the determination.  He asked you, as his tax advisor, any further actions that could be taken by Donald (Cayman Islands) Inc. to dispute the Commissioner’s determination.

4 Felix received a demand for tax payable on 10 August 2020.  He did not pay the tax even up to 15 February 2021.  Describe the actions which will be taken by Inland Revenue Department to recover the tax and any consequent charges.

5. Mr. Gordon commenced to operate Gordon’s Restaurant in Central District, Hong Kong on 1 July 2020.   He employed 10 staff for the restaurant.  The restaurant made a profit of $300,000 for the 9-month period ended 31 March 2021.  

Mr. Gordon enquired you, his tax adviser, his obligation to comply with the requirements of the Inland Revenue Ordinance (Chapter 112).