What US Expats Need to Know About Taxes in Hong Kong?

 

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.

The US Expat Tax Filing Considerations for Americans Living in Hong Kong

Hong Kong is one of the most popular places for American expats but how does living in this beautiful city affect their US expat taxes? Hong Kong is an economic hub of China and SouthEast Asia, is respected as one of the most important cities in the world. Additionally, living there as an American, you will think about your home country now and again plus rest assured that it has not forgotten you particularly when it comes to file US taxes.

What you should know?

American citizens and green card holders living in Hong Kong must continue to file a US tax return every year. But filling while living abroad comes with new considerations and questions like do I have additional info to report to the internal revenue system or how do my Hong Kong financial accounts affect my tax filing? How can I reduce my tax return?

In this post, we have outlined some considerations for US citizens working in Hong Kong, thus you know what affects the taxes for US citizens living in Hong Kong they pay as well as which forms taxpayers need to file American Tax for US Residents Living Hong Kong.

U.S expat tax filing considerations

Working as an American in Hong Kong can affect your taxes even if you do not stay for a long time. For instance- if any person earns income while on a short term assignment, that person will need to report that income on his or her US taxes. As you establish deeper financial roots in the city, you will have more considerations for your filling.

You have to report your Hong Kong financial accounts and assets. Usually US taxpayers with over $10000 in foreign bank or financial accounts are subject to FBAR filing and reporting needs. Furthermore, you may be subject to FATCA reporting needs if you have foreign assets valued at $200000 and higher. Taxpayers can reduce their US bill and avoid dual taxation with some tax strategies. You may take advantage of one of two options to lower your taxes. These options are mentioned just below:

    • The foreign earned income exclusion lets you exclude your wages from your US taxes. Keep in mind that this option is available to those individuals who meet certain time based residency needs. The foreign tax credit allows you to claim a credit for income taxes paid to an overseas government. It is usually more favorable for Americans living in Hong Kong to use the foreign earned income exclusion because of lower rates in Hong Kong. Your tax advisor can confirm the best option for you.

    • Your Hong Kong pension is nog tax free in the US. If you participate in a mandatory provident fund or MRP through your employer, you can deduct your contributions from your taxes in Hong Kong. But your contributions are not deductible and your employer's contributions are taxable for the US tax purposes.