Hong Kong, among the most favorite destinations particularly for US expats but how does living here affect their US expat taxes? Being an economic hub of SouthEast Asia and China, Hong Kong is respected as one of the most vital cities in the world. Remember, taxes are low here but the taxes for US citizens living in Hong Kong is different from the US. Americans living in Hong Kong have to consider their US taxes too.
In this post, we will come to know about the tax system and cross border issues between Hong Kong and the United States of America.
No matter whether it is dealing with the issue of having a different tax year than the US standard year or ensuring US expats are maximizing their overseas housing exclusion because of the high cost of renting, we ensure our clients optimize their tax situation.
Let's know about the tax rates in Hong Kong!
Net Chargeable Income Rate
0– 50,000 HKD 2%
50,001– 100,000 HKD 6%
100,001– 150,000 HKD 10%
150,001– 200,000 HKD 14%
Above 200,001 HKD 17%
Net total income (no allowances) Standard rate 15%
Individual income is taxed at a progressive rate on net chargeable income in Hong Kong or at a standard rate of 15 percent on net income. So, you can pay whichever is less than the other. As you can see above, income tax rates in Hong Kong are not the lowest but competitive. It is true when compared to American tax for US citizens living in Hong Kong which is top out at 37 percent.
Exclude HK income from US income tax with foreign earned income exclusion ( FEIE)
With FEIE, US citizens living abroad can exclude upto $107600 in foreign earned income from their income taxes. But, they should meet the bona fide residence test or the physical presence test to qualify. As taxes in Hong Kong are lower than US, US expat living there benefit from the Foreign earned income exclusion.
Social security number
Remember, Hong Kong doesn't have a social security system but they need a mandatory provident fund that provides the framework for a privately managed fund to accrue financial advantages for the workers in the City when they retire. Presently, the minimum contribution bis 5 percent of income from both the employee and employer and is subject to a maximum yearly contribution of HK $1200. If you earn less than HK$5000 every month, no payment is needed.
People who are on temporary stay in Hong Kong or pay into the US social security scheme, they do not need to pay into the mandatory provident fund. Keep in mind that the contribution to mandatory provident fund and other occupational retirement schemes are tax deductible upto 12000 Hong Kong dollars.
