If
you are an American living permanently or temporarily in Hong Kong, you need to
bear in your mind that there are some obligatory taxation-related and
filing-related compliances that you need to adhere to, as a true US citizen and
Green Card holder.
Here are details of
Hong Kong US Tax rules and regulations:
Non-compliance
1.
It
is mandatory that as a US permanent resident or citizen, it becomes mandatory
for you to submit annually your expatriate tax returns. This annual return needs to be filed using
the FinCEN Form 114 (FBAR) with the US Government. This form is about disclosing your assets,
irrespective of your present country of residence. Assets here typically mean
an aggregate balance of more than USD 10,000 in any bank account that is non-US
in nature. This is mandatory even if the balance exceeds
only once in a year and it applies even when this account has no income or
earnings. It is good to remember here
that if the filing of this important form or information is missed, it is
interpreted as non-compliance and hence you can attract huge penalties.
2.
Other
obligatory reporting includes providing specific information if you are
associated with a pension scheme, if you are a trust beneficiary or if you are
an entrepreneur in Hong Kong or if you are an investor with a collective
investment scheme. These declarations are not really associated with any tax
deductions or filing but if you fail to miss the deadline for submission of the
reports, you can attract penalties.
US Taxation of Hong Kong
Income
The US Government levies tax on the income
earned by its citizens and permanent residents abroad. Since you are also taxed
within Hong Kong, there are ways to help you with this double taxation aspect.
1. US Government’s
Foreign Earned Income Exclusion provision. Under this provision, you are
allowed to exclude an amount of USDD 105.900 from your foreign income and avoid
being taxed on this amount. In 2019, further changes were made to this
provision. Now, you can include your housing costs like rent paid and few other
additional provisions to increase the exclusion limit to USD 203,256.
2. Though the use
of Tax Credit provision, you are given a credit for the tax that you paid
locally to the Hong Kong government. The credit is a reduction that you get on
the tax that you need to pay the US Government taking into account the tax paid
by you in Hong Kong. There are two ways to go about this process – either the
paid basis or accrued basis. The paid format is a better one but in order to
use this plan optimally, you need to align it properly with the taxes paid in
Hong Kong.
There are complex computations and calculations
required for US Expat Tax in Hong Kong. You need to
plan your taxes well in order to minimize your tax liability. If you have just
moved into Hong Kong, things can get even more complicated.
For being eligible
for tax exclusions you need to plan your travel to US in a particular way or
your arrival in Hong Kong needs to be planned optimally for maximizing you tax
savings. Ensure that you get in touch with an experienced and credible taxation
planners and advisors in Hong Kong to optimize tax filing and compliances under
US Taxation of Hong Kong Income
rules and regulations.
