taxation 545222

B415F Taxation II Assignment 2 (January 2014 Term) Due Date: 31 March, 2014 For tax rates and personal allowances, please refer to your textbook or Inland Revenue Department’s website. Answer ALL of the following questions. Marks will be awarded for logical arguments, appropriate presentation, and original explanation in your answers. Outline where appropriate relevant tax provisions, guidelines published by the Inland Revenue Department and / or relevant tax cases in support. Question 1 (35 marks) You are an independent tax advisor and one of your clients, Triceratops Toys Manufacturing Limited, has provided you with the following information. Triceratops Toys Manufacturing Limited was incorporated in Hong Kong in 2002. The company was formed to take over the partnership business owned by the Cheung’s brothers, Albert Cheung and Bernard Cheung. Albert and Bernard each owns 40% of the shares of the company and the remaining 20% of the shares are owned by their sister, Crystal. The original Board of Directors consists of Cheung’s brothers and their sister, Crystal. In addition to being directors of the company, Albert and Bernard are responsible for the running of the company. Albert is the managing director and is responsible for the sales operations. Bernard holds the title of finance manager and is in charge of the compa ’s finance. Their brother-in-law, Dickson Tang is employed as the production manager to the manufacturing operations. The company has been profitable with the annual turnover over HK$20 million. The profits of the company have been mainly derived from exporting toys to overseas countries. The manufacturing operations had been carried out in Hong until 31 July 2012 when the company moved its manufacturing operations to Mainland China. The manufacturing operations in China began in August 2012. Although the manufacturing operations are now in China, the company maintains its purchase, sales and other…