Answer Happy

Question 2 (30 marks) Mr. Au is the tax advisor of Tech Ltd, a Hong Kong listed company with major business of trading in computer and accessories to South East Asia countries. Ben, the managing director of Tech Ltd, asks Mr. Au to provide tax advice on how to reduce profits tax liabilities of the company, Mr. Au suggests setting up a company in Bermuda. Most of the Tech Ltd's decision making as well as goods purchasing and selling activities will continue to be performed at its Hong Kong office, while the Inland Revenue Department will be informed that these activities have been transferred and performed in the Bermuda establishment outside Hong Kong, Mr. Au advises Ben that the business profits generated from this arrangement will be exempted from Hong Kong profits tax due to off-shore in nature. Mr. Au will help Tech Ltd to set up the Bermuda company and prepare all the necessary documents to support the offshore claim Mr. Au's wife holds 10% shares in Tech Ltd. Required: (a) Advise Ben the possible legal implications to himself and Tech Ltd. (14 marks) (b) Advise Ben on the ethicality of the intended actions, using the ethical theories of Utilitarian, Deontology as well as Virtual Ethics. (7 marks) (c) Explain the FIVE fundamental principles of the HKICPA Code of Ethics and evaluate whether Mr. Au's advice violates any of these principles. (9 marks) Total for Question 2:30 marks
Question 3 (15 marks) Ms. White is a Singapore resident who came to Hong Kong in September 2021 for holiday She was introduced by a Hong Kong property agent to visit a commercial property in Tsim Sha Tsui East. The property was owned by a Hong Kong company, A Ltd, which is wholly owned by Mr. Chan. Ms. White acquired the property in her own name in October 2021 in HKS18 million. She settled 70% of the acquisition cost by cash and financed the balance with a loyeur loan from a bank After the acquisition, Ms. White returned to Singapore and placed the property for sale with a few Hong Kong property agents for HKS21 million, In November 2021, a buyer was found and the property was sold at S21 million. Ms. White did not report the gain on disposal of million in her tax return. She had entered into similar transactions of buying and selling another two commercial properties in Hong Kong in 2018 and 2020 respectively Required: (a) Comment on the difference in stamp duty implications by comparing Ms. White's acquiring the property in her own name with the alternative of acquiring the shares in A Lid (Note: calculation of the amount of stamp duty payable is not required.) (6 marks) Explain whether the gain on disposal of Ms White's property in November 2021 likely subject to Hong Kong profits tax (9 marks) Total for Question 3: 15 marks (b)
Question 4 (27 marks) Peter Wong, a fellow member of HKICPA, is the financial controller of a multinational corporation in Hong Kong. For the year of assessment 2021/22, he received an annual salary of $3,000,000, and a cash bonus of $700,000. Peter lives in an apartment in Causeway Bay which is owned by Peter's mother. Peter repaid the mortgage bank loan (including $120,000 interest) for the apartment during the year. Peter commutes from home to office by his own car and incurred $30,000 car expenses during the ycar of assessment 2021/22. He paid a course fee of $20,000 for a diving class and bought four charity show tickets at a cost of $8,000 from Tung Wah Group of Hospitals during the year. Peter was divorced in 2018 and he is maintaining his 19-year old son, whé is currently studying a part-time university degree with the Chinese University of Hong Kong. His employer paid the school fee for his son in the amount of $80,000 during the year. His father is 72 years old and lives in a nursing home in Shenzhen, China. Peter paid a total of $180,000 to the nursing home during the year of assessment 2021/22. Peter thinks he is a disciplined taxpayer in the past years and the chances of his fax return being audited in this year should be very remote . He wants to minimize his net chargeable income in the 2021/22 tax return so he can pay less tax and save more money. He intends to under-report his cash bonus of $700,000 paid by his employer. Further, he will not report the school fee of $80,000 paid by his employer. He also plans to claim the deductions of (1) car expenses of $30,000; (2) self-education expenses of $20,000 (for course fee of diving class); (3) donation of $8,000; (4) elderly residential care expense; (5) home loan interest of $120,000. He also wishes to claim (1) married person's allowance, and (2) child allowance. Required: a) Name FIVE stakeholders in this case. (5 marks) (b) Advise Peter on his tax position on his intended actions for the year of assessment 2021/22 (10 marks) (c) Discuss the ethicality of Peter's behaviour in terms of the standard of Confucian Ethics (6 marks) (d) Advise Peter on the potential consequences if a member of the HKICPA is found to violate the HKICPA's Code of Ethics. (6 marks) [Total for Question 4:27 marks)