Sample on Professional Letter to Client 21 October 2011 Pancake Limited [Address] Attention: Mr.

XXX Dear Sir, Part 1 Pancake Limited (the Company) PROFITS TAX YEAR OF ASSESSMENT [2010/11] We would like to attach the draft tax computation to you for your review and approval. We would like to draw your attention that the tax computation are based on the profits and loss account for the year ended 31 March 2011 together with other information supplied to us, we have calculated and enclose for attention Appendix 1 computation for assessable profits and tax payable. As calculated, it is assessable profit of HK$1,831,198 and Hong Kong profits tax is calculated at the rate of 16.5% (2010:16.5%) on assessable profit and HK$302,148 tax payable for 2010/11. In reviewing the Profit Tax Computation, please note the following and if there is any adjustment require, it may affect the draft tax computation. (1) Referral fees and Royalty fees Royalty payments made to a non-resident company or individual for the use of intellectual property both in and outside Hong Kong are subject to withholding tax. Scope of withholding tax: Withholdings tax is the tax charged to a non-resident company or individual that derives income from a Hong Kong source for services provided or work done in Hong Kong. Only specific types of payments are subject to withholding tax. Withholding tax rate for royalties due to non resident companies is 4.95%, provided the non resident companies are not associates. A withholding tax rate of 4.5% applies to royalty payments made to unaffiliated non-resident individuals. If royalty payments are made to non resident companies that are associates, a withholding tax rate of 16.5% will apply, subject to certain other criteria. A withholding tax of 15% applies on royalty payment on royalty payments made to affiliate non resident individuals. Generally, a non-resident is chargeable to tax in the name of his agent in respect of all his (the non-residents) profits arising from HK from any trade, profession or business carried on in HK, whether or not the agent has the receipt of the profits and the tax can be recovered out of the assets of the non-resident or from the agent. The agent is required to retain from the assets sufficient money to pay the tax.

In this situation, please advice whether there is any signed agreement between the Company and Greater China or Kawi Consultants which if there is any withholding tax paid on behalf of Greater China for Referral fees and Kawi Consultants for Royalty fees. If yes, please provide the related information and which will affect the assessable profit of the Company. (2) Legal and professional fees Expenditure on legal and professional fees which is essential that, at the time of lodgement, returns must be accompanied by schedules, and explanations in respect of the legal and professional fee items (include the names of the recipients and nature of services). In this situation, please provide the corresponding supporting of the above mentioned. (3) Miscellaneous expenses We have been informed that there is no any no unusual or capital item in this record and mentioned in Profit and Loss which provided by the Company. However, we would like to ask whether the Company can provide the corresponding supporting to us for our reference. If we found that there is any items should be treated as capital in nature then we will adjust the assessable profit. (4) Estimated repairs and maintenance Expenditure on estimated repairs and maintenance is non deductable. Even if something qualifies as an expense, it is not necessarily deductible. As a general rule, expenses are deductible if they relate to a taxpayers trade or business activity or if the expense is paid or incurred in the production or collection of income from an activity that does not rise to the level of a trade or business (investment activity). (5) Land and building As we have not obtain supporting documents for the Land and building currently, we may treat the written down value for 2009/10 is HK$3,000,000 in this year assessment. If the Company did not agree with our treatment, please inform us as soon as possible. And please provide the above information or documents to us for our reference: (1) (2) The last previous tax computation 2009/10 with schedule Please provide the breakdown of the following accounts: - Interest accrued - Dividends - Other payables - Fixed assets register

Hire purchase agreement for Motor vehicle

Part 2 Temporarily engineering consultant We would like to outline as below about the Hong Kong salaries tax charge, especially the time-apportionment claim and tax exemption for the Hong Kong salaries tax for your reference. Pursuant to Section 8(1) of the Hong Kong Inland Revenue Ordinance (IRO), salaries tax shall be charged for each year of assessment (which runs from 1 April to 31 March of the following year) on every person in respect of his income arising in or derived from Hong Kong from any office or employment of profit and pension. Once it is determined that the income arises in or is derived from Hong Kong, the whole amount receivable for the year will be liable to salaries tax, unless specifically exempted. Under the prevailing practice of the Inland Revenue Department (IRD), when determining whether income from an employment is subject to the basic charge of Hong Kong salaries tax, the source of the employment is the decisive factor. The IRD would consider all relevant factors (i.e. totality of facts) when determining the locality of an employment and will beyond superficial features of the employment. However, the IRD indicated that it will particularly emphasize on the below three factors: (a) (b) (c) Where the employment contract was negotiated and entered into, and is enforceable, whether in Hong Kong or outside Hong Kong; Where the employer is resident, whether in Hong Kong or outside Hong Kong; and Where the employees remuneration is paid to him, whether in Hong Kong or outside Hong Kong

From our experience, the IRD would generally accept that an employment is located outside Hong Kong if the contract of employment was negotiated, entered into and enforceable outside Hong Kong with an employer who is resident outside Hong Kong and the employees remuneration is paid to him outside Hong Kong. If the employment is located outside Hong Kong, the time-apportionment claim is applicable to the employee, i.e. the IRD will generally look at the number of days an employee spent in Hong Kong and apportion his remuneration on a time-in time-out basis. If you are not satisfied the above then if you are satisfy one of the following tax exemption rules. 60-days tax exemption If you performed all your services outside Hong Kong, your employment income should be exempt from Hong Kong salaries tax. In determining whether or not all services are rendered outside Hong Kong, no account will be taken of any services rendered in Hong Kong during visits not exceeding a total of 50 days during a year of assessment under the

IRO. In order to qualify for this tax exemption, you must satisfy that you visit Hong Kong. The IRO dose not define the meaning of visit. A visit ordinary means a short or temporary stay and an individual who is a permanent Hong Kong resident cannot make a visit to Hong Kong even if he normally spends much of his time overseas. There fore, whether the physical presence of a person in Hong Kong constitutes a visit is a matter of facts. Section 8(1A) (c ) tax exemption A taxpayer who has rendered services outside Hong Kong is prevented from paying tax twice on the same income by the virtue of Section 8(1A) (c ) of the IRO. According to the provision, a taxpayer is exempt from Hong Kong salaries tax if the following three conditions are satisfied:

(a) (b) (c)

Employment income was derived by the taxpayer from services rendered outside of Hong Kong; Such income is chargeable to overseas tax of substantially the same nature as salaries tax in that territory outside of Hong Kong; and The IRD is satisfied that the taxpayer has paid that overseas tax.

In order to substantiate Section 8(1A) (c ) exemption claim, the taxpayer must provide supporting documents such as copy of the foreign tax return and tax payment certificate to prove that foreign taxes have been paid and the related amount of employment income is being taxed in the foreign tax jurisdiction. We are pleased to discuss that with you/ your management further on the above issues. If you have questions, please feel free to contact us. Just a reminder, the tax due date will be on 15 November 2011 as the Company year of assessment as at 31 March 2011. Please provide the above information to us as soon as possible. We would like to submit the profit return to IRD by the end of this month to meet the due date from IRD. Otherwise there will be some penalty charged by IRD. Thank you. Your faithfully,

Tax consultant