Hk Taxation

1. David’s salaries tax for year of assessment 2010/11 were due as follows: 1st instalment $10,500 due on 2 January 2012 2nd instalment $4,000 due on 4 April 2012. However David failed to pay the 1st instalment by the end of January 2012. What actions will be taken by Inland Revenue Department to recover the tax from David? Ans. When the tax was overdue after 2 January 2012, total tax $14,500 became due immediately. Inland Revenue Department would impose 5% surcharge on $14,500.

The Department could take civil action to pursue the outstanding tax and surcharge in court. It could also issue a recovery notice to the employer of David or any third parties known to owe David money. If the tax was still outstanding for over 6 months, a further 10% surcharge could be levied. The Department could also consider to applying to court for departure prevention practice preventing David from leaving Hong Kong. 2. Joseph has a property at Flat G, 8th floor, Tower 3, Whampoa Garden.

He rents it to James at $10,000 per month starting from 1 October 2010 for 2 years. In the tenancy agreement, Joseph will be responsible for the repairs of the premises and James will pay the rates $1,200 per quarter and management fees $800 per month. In April 2011, some minor repairs were done to the toilet. The repair expense of $1,000 was paid by James. Calculate the property tax of Joseph for years of assessment 2010/11 and 2011/12. Ans. Joseph’s Property Tax are |Year of assessment |2010/11 |2011/12 | |Letting period |1.

10. 2010 to 31. 3. 2011 |y. e. 31. 3. 2012 | |Rental Income | |$60,000 | |$120,000 | |Repair paid by James | | 0 | | 1,000 | |Assessable Value | |60,000 | |121,000 | |Less: 20% deduction | |(12,000) | |(24,200) | |Net assessable value | |48,000 | |96,800 | | | | | | | | | | | | | |Property Tax @15% | |$7,200 | |$14,520 | | | | | | | | | | | | | 3. Karen is approached by PP Corporation Ltd to rent her office at Unit 1001, Connaught Place, Central District at a monthly rent of $20,000 for 4 years starting from 1 November 2008.

It will pay her a premium of $450,000 at the signing of the tenancy agreement and will pay rates and building management fees. Find the net assessable value of Karen for years of assessment 2008/09 onwards. (Assume there will not be any change to the tax law after 1 April 2008. ) Ans. Karen’s Net Assessable Value will be: |Items |2008/09 |2009/10 |2010/11 |2011/12 |2012/13 | |Letting Period |1. 11. 08-31. 3. 09 |y. e. 31. 3. 10 |y. e. 31. 3. 11 |y. e. 31. 3. 12 |1. 4. 12-31. 10.

12 | |Rent |$100,000 |$240,000 |$240,000 |$240,000 |$140,000 | |Premium | 62,500 |150,000 |150,000 | 87,500 | 0 | |Assessable Value | | | | | | | |162,500 |390,000 |390,000 |327,500 |140,000 | |Less:20% | 32,500 | 78,000 | 78,000 | 65,500 | 28,000 | |NAV |$130,000 |$312,000 |$312,000 |$262,000 |$112,000 | Note: Lease Premium will be spread over a maximum period of 36 months. 4. Mary’s flat at 12th floor, Flat D Tower 3 Yuen Long Centre was let out from 1 April 2009 to Peter for 2 years at $10,000. Rates $1,500 per quarter and management fees $600 per month will be paid by Mary. Peter paid rent monthly until 30 December 2009.

He stayed in the flat until 30 April 2010 without paying any more rent. Mary could not trace him anywhere. Mary then used the 2-month deposit to settle part of the outstanding rent. The property was left vacant until another tenant John rent the property at $12,000 starting from 1 January 2011. Rates and management fees were paid by John. Peter eventually was able to pay 1-month rent to Mary in June 2011. Calculate Mary’s net assessable value for the years of assessment 2009/10, 2010/11 and 2011/12. Ans. Mary’s net assessable value would be |Descriptions |2009/10 |2010/11 |2011/12 | |Period covered |1. 4.

09-31. 3. 10 |y. e. 31. 3. 11 |y. e. 31. 3. 12 | |Rental Income - Peter |$120,000 |$10,000 | | |Rental Income - John | | 36,000 |$144,000 | |Rent Recovered | | |10,000 | |Less: Irrecoverable Rent * | |(20,000) | | |Assessable Value |$120,000 |$26,000 |$154,000 | |Less: Rates | 6,000 | 500 | | | |114,000 |25,500 |154,000 | |Less: 20% | 22,800 | 5,100 | 30,800 | |Net Assessable Value |$91,200 |$20,400 |$123,200 | Note: * Peter did not pay rent for period from 1 January 2010 to 30 April 2010. There were 2-month deposit used to set off 4 months outstanding rent. The irrecoverable rent would then be 2 months.

Sarah from Law Aspect

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