Question
Mr Ma was a manager employed by a local import and export company. In his employment contract covering the three years ended 31 March 2012, it was provided that Mr Ma's salary would be $55,000 per month with one month's bonus payable at the end of March each year. Mr Ma was entitled to receive a holiday passage allowance, free quarters, reimbursement of utilities and free education benefits for his child.
However, Mr Ma was required to pay for all local travelling expenses when visiting local clients and customers without reimbursement from the employer. At the end of the contract period, Mr Ma was entitled to a gratuity of $300,000. In the year ended 31 March 2012, Mr Ma received a holiday passage allowance of $60,000, three-fifths of which was used to purchase holiday packages for him and his family while the balance was retained by him. Mr Ma's son, aged 20, was studying at the University of London, the tuition fee for the year being $90,000. Mr Ma lived with his wife in a flat in Causeway Bay provided by his employer, and the utility benefit he received during the year was $10,000. The total travelling expenses incurred by Mr Ma during the year for visiting the local clients amounted to $24,000. Mr Ma donated $80,000 to the Community Chest of Hong Kong during the year. He contributed $25,000 to an MPF-exempt retirement scheme during the year ended 31 March 2012. His employer contributed an equal amount to the stated scheme. In January 2012, Mr Ma's application to emigrate to Australia was approved, and therefore he decided not to renew his employment contract with the employer. Mrs Ma has been a housewife and did not earn any salary income during the year. For many years, Mrs Ma had paid $1,500 per month for the maintenance of her father, who was 65 years old at the end of March 2012 and was resident in Hong Kong.Required:
a Determine the Hong Kong salaries tax liability of Mr Ma for the year of assessment 2011/12, making the best election where appropriate. Ignore provisional salaries tax and tax reduction or waiver.
b Justify and explain the tax treatments you have accorded to the following items in the tax computation:
i reimbursement of utilities
ii gratuity upon completion of contract
iii contribution to retirement schemes
iv holiday passage allowances.