שב
CONFIDENTIAL &
from.....
Commissioner of Inland Revenue
In HQ CIR/CON/18A III
Ref.............
Tel. No.
5-8945002
15 September 1987
Date.
MEMO
URGENT
To
Deputy Financial Secretary [Atta. Mr D.K.M. Gibson]
444001453 G
Your Ref... (22) in FIN CR 35/581/857
dated
18.8.1987.
Civil Service : Limited Compensation Scheme
I refer to your memo of 18 August 1987 concerning the
above Scheme,
Generally speaking, in the absence of a specific exemption provision any sum received by an employee from his employer is chargeable to Salaries Tax as being income arising from an office or employment. Leaving aside for the moment the enhanced commutation of pension payment, there is no specific provision in the Inland Revenue Ordinance which would exempt from tax payments made under the Scheme. However, as a matter of general taxation law sums which are "compensation for loss of office or employment" are not liable to tax. Whether a particular sum is "compensation for loss of office or employment" must be determined in the light of principles to be drawn from a series of English tax cases.
3.
Applying those principles to the above Scheme I am of the view that any lump sum paid to an eligible officer who is directed to retire would properly be regarded as compensation for loss of office or employment and would therefore not be chargeable to Hong Kong Salaries Tax. On the other hand, with regard to those officers who are superseded for promotion and thereby become en- titled to a payment under the Scheme while continuing to be employed there seems no doubt that, as the law now stands, such payments would not be "compensation for loss of office or employment" and i would be wholly chargeable to Salaries Tax.
{
4.
Then there are those officers who having been superseded
This for promotion make application to retire under the Scheme. seems to be a very different situation from that of officers directed to retire and while the position is not entirely clear the weight of authority favours the view that payments received under the Scheme in these circumstances should not be regarded as "compensation for loss of office or employment", in the sense in which that phrase has come to be known,
5.
It is therefore my view that in order to ensure that all payments made under the Scheme to officers who are superseded for promotion, including those who subsequently retire at their own request are tax-free, it will be necessary to amend the Inland Revenue Ordinance to provide the necessary specific exemption. How- ever, if this is to be done I would suggest that the amendment refer to all payments made under the Scheme notwithstanding that some
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TIA!
機密
/payments
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