Background facts 1

Background facts 1. On 4 September 2010, Karen Greenland ("Karen") entered into a tenancy agreement to let out one of the retail shops she owned at Tsimshatsui {"TST shop") with rental at $170,000 per month. In the agreement, it was agreed and stated that Karen was being responsible for the rates in respect of the TST shop. This tenancy was early terminated on 21 July 2011. By a tenancy agreement dated 21 July 2011, Karen let out the TST shop for two years from 27 July 2011 at a monthly rent of $180,000. Likewise, as stated in the agreement, Karen was being responsible for the rates and management fees in respect of TST shop. By a tenancy agreement dated 3 March 2011, Karen let out another shopthat she owned at Causeway Bay {"CWB shop") for two years commencing from 15 March 2011 at a monthly rent of 128,000. Karen was responsible for the rates and management fees in respect of CWB shop. On 24 March 2013, Karen entered into another tenancy letting out CWB shop for two years commencing from 15 March 2013 at a monthly rental of $250,000, with Karen being responsible for rates and management fees in respect of that shop. Additional Information: 5. 6. Karen ?led her property tax returns for the relevant years based on the above gross rental income. She also claimed deductions on rates and management fees that she paid to the government and vendors from the rentals she received under the four tenancies described above. Required: [property tax computation is not required] a} What is the scope of charge under Property Tax in Hong Kong as stipulated in the Inland Revenue Ordinance Ca p.112? (Note.- o'on't simpiy copy from the iecture siides) {4 marks] b} How is "net assessable value" de?ned under the Inland Revenue Ordinance Cap. 112? {3 marks] c} What does "consideration" Include for Property Tax purpose, under the Inland Revenue Ordinance Cap.112? {2 marks] d} Based on a}, b} and c} above, discuss briefly whether Karen would be successful in claiming the deductions as mentioned in poi nt 6. above. (Note: this case is not as straight forward as the one we discussed in the ciasses concerning residen tiai properties in an es tare) {3 marks] e} Based on the issues you discussed above and your professional judgment, would you advise Karen to rewrite the terms and conditions concerning rates and management fees in future tenancy agreements that she will be entering into with her tenants? lfyes, how? {3 marks]