Disguised employment relationship S.9A ▸ Purpose ° To counteract arrangement made to avoid Salaries tax using service companies "Type I" service companies arrangement 。 An individual sets up a service company which is controlled by him or his associate ⚫ For the services provided by the individual, instead of being paid as a salary to him, the remuneration is paid as a consultancy fee to the service company ° The arrangement is structured with a view that the service company will pay little profits tax on the consultancy fee received by way of claiming deductions on “tax efficient” employee benefits 63 mui Topic 3 - Anti-avoida x O Google 翻譯 Home | bartleby 螢幕快照2024-04-30 上午12.38.33— 已編輯∨ + 螢幕快照 2024-04-30 上午12.39.06 – 已編輯 Disguised employment relationship Conditions for s.9A ° о There is an agreement (verbal or written) Services have been carried out under the agreement by an individual ("the Relevant Individual") for the "relevant person” or any other person; and Remuneration for the services has been paid to a corporation controlled by the Relevant Individual Effects о о The relationship between the "relevant person" (i.e. the fee payer) and the Relevant Individual (i.e. the service provider) is treated as an employer-employee relationship. Remuneration for the services are deemed to be income derived by the Relevant Individual from employment and hence chargeable to Salaries tax. The "relevant person" must comply with the filing obligations as an employer. Disguised employment relationship ▸ Illustration о Henry is a doctor employed by a private hospital, Castle Hospital in HK as a medical officer to provide medical service. ⚫ The monthly salaries was HK$200,000. 000 Castle Hospital B|+ Employment relationship Henry 65 67 Disguised employment relationship ▸ The arrangement Employer Employment relationship Individual Consultancy fee Employment relationship Employer Service company Individual Disguised employment relationship ▸ To avoid double taxation о Service company о • Service fee received is not chargeable to profits tax and accordingly, no deductions or depreciation allowance will be allowed The Relevant Individual Remuneration paid to him by the service company is not chargeable to salaries tax to the extend that the remuneration is attributable to services carried under the agreement Disguised employment relationship ▸ Illustration 0 о Henry sets up a company called Fake Limited, of which he is the major shareholder and director and resigns from Castle Hospital. Fake Limited enters a contract ("Contract 1") with Castle Hospital, agreeing to assign Henry to work at the hospital, for a monthly consultancy fee of HK$200,000. 。 Fake Limited employs Henry to provide consultancy services with monthly salary of HK$180,000. In addition, the household expenses e.g. water, electricity, gas, laundry, carpark, management fees and membership fees totaling HK$20,000 each month are borne by Fake Limited Save your Accounting textbooks Solve math equations Build Your Accounting Essay Consultancy Castle Hospital fee Employment relationship Fake Limited Henry 68

Disguised employment relationship S.9A ▸ Purpose ° To counteract arrangement made to avoid Salaries tax using service companies "Type I" service companies arrangement 。 An individual sets up a service company which is controlled by him or his associate ⚫ For the services provided by the individual, instead of being paid as a salary to him, the remuneration is paid as a consultancy fee to the service company ° The arrangement is structured with a view that the service company will pay little profits tax on the consultancy fee received by way of claiming deductions on “tax efficient” employee benefits 63 mui Topic 3 - Anti-avoida x O Google 翻譯 Home | bartleby 螢幕快照2024-04-30 上午12.38.33— 已編輯∨ + 螢幕快照 2024-04-30 上午12.39.06 – 已編輯 Disguised employment relationship Conditions for s.9A ° о There is an agreement (verbal or written) Services have been carried out under the agreement by an individual ("the Relevant Individual") for the "relevant person” or any other person; and Remuneration for the services has been paid to a corporation controlled by the Relevant Individual Effects о о The relationship between the "relevant person" (i.e. the fee payer) and the Relevant Individual (i.e. the service provider) is treated as an employer-employee relationship. Remuneration for the services are deemed to be income derived by the Relevant Individual from employment and hence chargeable to Salaries tax. The "relevant person" must comply with the filing obligations as an employer. Disguised employment relationship ▸ Illustration о Henry is a doctor employed by a private hospital, Castle Hospital in HK as a medical officer to provide medical service. ⚫ The monthly salaries was HK$200,000. 000 Castle Hospital B|+ Employment relationship Henry 65 67 Disguised employment relationship ▸ The arrangement Employer Employment relationship Individual Consultancy fee Employment relationship Employer Service company Individual Disguised employment relationship ▸ To avoid double taxation о Service company о • Service fee received is not chargeable to profits tax and accordingly, no deductions or depreciation allowance will be allowed The Relevant Individual Remuneration paid to him by the service company is not chargeable to salaries tax to the extend that the remuneration is attributable to services carried under the agreement Disguised employment relationship ▸ Illustration 0 о Henry sets up a company called Fake Limited, of which he is the major shareholder and director and resigns from Castle Hospital. Fake Limited enters a contract ("Contract 1") with Castle Hospital, agreeing to assign Henry to work at the hospital, for a monthly consultancy fee of HK$200,000. 。 Fake Limited employs Henry to provide consultancy services with monthly salary of HK$180,000. In addition, the household expenses e.g. water, electricity, gas, laundry, carpark, management fees and membership fees totaling HK$20,000 each month are borne by Fake Limited Save your Accounting textbooks Solve math equations Build Your Accounting Essay Consultancy Castle Hospital fee Employment relationship Fake Limited Henry 68