United States (US) and Hong Kong Tax Treaty (DTAS) No United States (US) and Hong Kong Tax Treaty Agreement (DTA) exist. Getting tax advice for Americans living in Hong Kong or Hong Kongers in the States is therefore advisable. The IRS’s general international tax laws apply to Americans with Hong Kong assets or Hong Kongers with US income. What are the basics of the tax treaty As a tax advisor who owns real estate property investments, I know many American ex-pats worry about their US and Hong Kong tax liabilities. I hear many stories about Americans paying more tax than they need to on their income sources in the US and Hong Kong. Even though the US and Hong Kong do not have a bilateral tax treaty, if an American has assets and/or income in Hong Kong, they may have to report to the IRS. Americans are taxed on their worldwide income. Even if the income is earned or sourced from Hong Kong, it is taxable in the US. This is unless a limitation, exception or exclusion applies. The general IRS tax and reporting rules apply without a US and Hong Kong tax treaty. Hong Kong has entered into several tax treaties with other countries. If you are a Hong Konger with investments in other countries, it is important to check to determine potential tax liabilities, exceptions and exclusions. Expat taxes for Hong Kong are different to US ex-pat taxes. Persons with jobs not within Hong Kong are only liable for the tax on salaries from any income from work occurring within Hong Kong. This is calculated on ‘days in’ compared to ‘days out’. Employment outside Hong Kong is determined by whether the employment contract is enforceable outside Hong Kong, the employer is a non-resident, and the employee is paid their wage outside Hong Kong. Visit here to find out more about US tax treaties. The issue of the US and HK You might be an American paying more tax in Hong Kong (HK) than you need to. Hong Kong is popular for American ex-pats because of its favourable taxation. The Hong Kong tax rate is progressive and capped at 17%. The Hong Kong tax on salaries is based on a person’s income, less any personal allowances, allowable deductions and donations to charity. The tax year in Hong Kong starts on 1st April and ends on 31st March. Hong Kong’s Inland Revenue Department should issue you your tax return in the first part of May. The return is required to be completed no later than one month from receipt of it. With good reason, the Inland Revenue Department allows due date extensions, but the application for an extension must be sent before the original due date. There is no tax withholding in Hong Kong. Payments of taxes are in two separate instalments. The initial payment is 75% due in the last quarter. The remaining tax is due immediately after the end of the year. It is important to remember that these dates are different to US ex-pat tax due dates. Because the Hong Kong dates differ from US tax deadlines, you must pro-rate income and taxes paid when you complete your US tax return. There may also be a reporting requirement for US persons with Hong Kong assets, investments, accounts and income. If you understand the rules and regulations, you can pay less tax in Hong Kong than you need as an American. I get valuable advice from my tax advisors, ensuring I do not pay more tax in Hong Kong than I need to. Do you? Can Americans travel to HK? Americans can save taxes in Hong Kong if they understand the rules. For many reasons, such as tax savings, American ex-pats choose Hong Kong to travel to. Value Added Tax, tax withholding, taxes on capital gains, sales tax, and wealth taxes do not exist in Hong Kong. There are also no gift or estate taxes for Americans to pay there. By residing in Hong Kong, US ex-pats are not exempt from other international taxes. Because Hong Kong taxes are less than US taxes, you might owe the IRS more than other ex-pats in their countries, since they can deduct taxes paid in Hong Kong under tax treaties. If an income stream comes from a Hong Kong source, you will generally have to report it in a Hong Kong tax return. If the income comes from any other source, you will generally not have to report it to the Inland Revenue Department in Hong Kong. Your citizenship and residency status are irrelevant to whether you must file or pay taxes in Hong Kong. If you are a resident or citizen of Hong Kong, but your income comes from outside of Hong Kong, you will not be taxed on that income. How can Americans avoid paying tax in Hong Kong? All US citizens living abroad must file a federal tax return to the Internal Revenue Department (IRS) regardless of whether or not they live in Hong Kong. As an American living in Hong Kong, you will probably have to file taxes with the Hong Kong government. Hong Kong remains a popular choice for US ex-pats because of its low tax rates. The main tax form in Hong Kong for American ex-pats is BIR60. The IRS provides several tax credits and deductions for Americans living overseas. The three most common are: Foreign Earned Income Exclusion (FEIE) This credit lets US ex-pats exclude a certain amount of foreign-earned income from US taxation. You can claim it by filing Form 2555. Foreign Tax Credit (FTC) Using the FTC, American ex-pats can deduct the income taxes they paid to foreign governments from their US tax bill. This helps to reduce the possibility of double taxation. If you qualify for Foreign Tax Credit, you claim it by filing Form 1116. Foreign Housing Exclusion Foreign Housing Exclusion lets US ex-pats deduct housing-related expenses from their US tax bill. To claim it, you must file Form 2555. Based on the current US tax laws, the only way to avoid filing a US tax return and paying US taxes in Hong Kong is to renounce your US citizenship. Renouncing your US citizenship is a permanent decision. How do Americans pay taxes in both countries? Most American ex-pats living abroad in Hong Kong must file an annual income tax return with the IRD. As a US citizen, you must file at least one US tax form. The most common tax forms American ex-pats have to file are: IRS Form 1040 (individual income tax return) Form 1040 is the standard US individual income tax return. All US citizens must file this form if they live in Hong Kong. For most US citizens, Form 1040 is due on 18 April, but for American ex-pats living in Hong Kong, that deadline is automatically extended to 15th June. IRS Form 8938 (Statement of Specified Foreign Financial Assets or FATCA) If you own non-US financial assets valued above certain thresholds, you must file a FATCA report. The specific threshold for your finances will depend on your filing status and whether you qualify as a bona fide resident of Hong Kong. If you do have to file a FATCA report, attach it to your Form 1040 and file both with the IRS at the same time. FinCEN Form 114 (Report of Foreign Bank and Financial Accounts or FBAR) If you have at least $10,000 deposited in one or more non-US bank accounts, you will need to report it by filing FinCEN Form114 also known as FBAR. I’m aware of these tax requirements in Hong Kong and the US because I have a dedicated and professional team of tax advisors helping me. It is important for American ex-pats in Hong Kong to get the right tax advice at the right time to minimise their tax liabilities.
United States (US) and Hong Kong Tax Treaty (DTAS) No United States (US) and Hong Kong Tax Treaty Agreement (DTA) exist. Getting tax advice for Americans living in Hong Kong or Hong Kongers in the States is therefore advisable. The IRS’s general international tax laws apply to Americans with Hong Kong assets or Hong Kongers with US income. What are the basics of the tax treaty As a tax advisor who owns real estate property investments, I know many American ex-pats worry about their US and Hong Kong tax liabilities. I hear many stories about Americans paying more tax than they need to on their income sources in the US and Hong Kong. Even though the US and Hong Kong do not have a bilateral tax treaty, if an American has assets and/or income in Hong Kong, they may have to report to the IRS. Americans are taxed on their worldwide income. Even if the income is earned or sourced from Hong Kong, it is taxable in the US. This is unless a limitation, exception or exclusion applies. The general IRS tax and reporting rules apply without a US and Hong Kong tax treaty. Hong Kong has entered into several tax treaties with other countries. If you are a Hong Konger with investments in other countries, it is important to check to determine potential tax liabilities, exceptions and exclusions. Expat taxes for Hong Kong are different to US ex-pat taxes. Persons with jobs not within Hong Kong are only liable for the tax on salaries from any income from work occurring within Hong Kong. This is calculated on ‘days in’ compared to ‘days out’. Employment outside Hong Kong is determined by whether the employment contract is enforceable outside Hong Kong, the employer is a non-resident, and the employee is paid their wage outside Hong Kong. Visit here to find out more about US tax treaties. The issue of the US and HK You might be an American paying more tax in Hong Kong (HK) than you need to. Hong Kong is popular for American ex-pats because of its favourable taxation. The Hong Kong tax rate is progressive and capped at 17%. The Hong Kong tax on salaries is based on a person’s income, less any personal allowances, allowable deductions and donations to charity. The tax year in Hong Kong starts on 1st April and ends on 31st March. Hong Kong’s Inland Revenue Department should issue you your tax return in the first part of May. The return is required to be completed no later than one month from receipt of it. With good reason, the Inland Revenue Department allows due date extensions, but the application for an extension must be sent before the original due date. There is no tax withholding in Hong Kong. Payments of taxes are in two separate instalments. The initial payment is 75% due in the last quarter. The remaining tax is due immediately after the end of the year. It is important to remember that these dates are different to US ex-pat tax due dates. Because the Hong Kong dates differ from US tax deadlines, you must pro-rate income and taxes paid when you complete your US tax return. There may also be a reporting requirement for US persons with Hong Kong assets, investments, accounts and income. If you understand the rules and regulations, you can pay less tax in Hong Kong than you need as an American. I get valuable advice from my tax advisors, ensuring I do not pay more tax in Hong Kong than I need to. Do you? Can Americans travel to HK? Americans can save taxes in Hong Kong if they understand the rules. For many reasons, such as tax savings, American ex-pats choose Hong Kong to travel to. Value Added Tax, tax withholding, taxes on capital gains, sales tax, and wealth taxes do not exist in Hong Kong. There are also no gift or estate taxes for Americans to pay there. By residing in Hong Kong, US ex-pats are not exempt from other international taxes. Because Hong Kong taxes are less than US taxes, you might owe the IRS more than other ex-pats in their countries, since they can deduct taxes paid in Hong Kong under tax treaties. If an income stream comes from a Hong Kong source, you will generally have to report it in a Hong Kong tax return. If the income comes from any other source, you will generally not have to report it to the Inland Revenue Department in Hong Kong. Your citizenship and residency status are irrelevant to whether you must file or pay taxes in Hong Kong. If you are a resident or citizen of Hong Kong, but your income comes from outside of Hong Kong, you will not be taxed on that income. How can Americans avoid paying tax in Hong Kong? All US citizens living abroad must file a federal tax return to the Internal Revenue Department (IRS) regardless of whether or not they live in Hong Kong. As an American living in Hong Kong, you will probably have to file taxes with the Hong Kong government. Hong Kong remains a popular choice for US ex-pats because of its low tax rates. The main tax form in Hong Kong for American ex-pats is BIR60. The IRS provides several tax credits and deductions for Americans living overseas. The three most common are: Foreign Earned Income Exclusion (FEIE) This credit lets US ex-pats exclude a certain amount of foreign-earned income from US taxation. You can claim it by filing Form 2555. Foreign Tax Credit (FTC) Using the FTC, American ex-pats can deduct the income taxes they paid to foreign governments from their US tax bill. This helps to reduce the possibility of double taxation. If you qualify for Foreign Tax Credit, you claim it by filing Form 1116. Foreign Housing Exclusion Foreign Housing Exclusion lets US ex-pats deduct housing-related expenses from their US tax bill. To claim it, you must file Form 2555. Based on the current US tax laws, the only way to avoid filing a US tax return and paying US taxes in Hong Kong is to renounce your US citizenship. Renouncing your US citizenship is a permanent decision. How do Americans pay taxes in both countries? Most American ex-pats living abroad in Hong Kong must file an annual income tax return with the IRD. As a US citizen, you must file at least one US tax form. The most common tax forms American ex-pats have to file are: IRS Form 1040 (individual income tax return) Form 1040 is the standard US individual income tax return. All US citizens must file this form if they live in Hong Kong. For most US citizens, Form 1040 is due on 18 April, but for American ex-pats living in Hong Kong, that deadline is automatically extended to 15th June. IRS Form 8938 (Statement of Specified Foreign Financial Assets or FATCA) If you own non-US financial assets valued above certain thresholds, you must file a FATCA report. The specific threshold for your finances will depend on your filing status and whether you qualify as a bona fide resident of Hong Kong. If you do have to file a FATCA report, attach it to your Form 1040 and file both with the IRS at the same time. FinCEN Form 114 (Report of Foreign Bank and Financial Accounts or FBAR) If you have at least $10,000 deposited in one or more non-US bank accounts, you will need to report it by filing FinCEN Form114 also known as FBAR. I’m aware of these tax requirements in Hong Kong and the US because I have a dedicated and professional team of tax advisors helping me. It is important for American ex-pats in Hong Kong to get the right tax advice at the right time to minimise their tax liabilities.
