What Are The Provisions Americans Need To Know About US Taxation Of Hong Kong Income Before Visiting?

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So, you have made your mind to work in Hong Kong. Right now, you probably have a million things going in your mind- where to start and whether it is the right move this time. Whether you’re planning to move to Hong Kong permanently, for the foreseeable future or just for a short term assignment, the decision can be overwhelming- especially from the financial planning perspective. But before everything, there are certain provisions related to US taxation of Hong Kong income that you must know as an American citizen and that’s also before landing in Hong Kong.

This informational post covers 5 key provisions for Americans who are planning to visit in Hong Kong to earn income. Even if you find these taxation provisions a little overwhelming, don’t need to take stress as you can avail the expertise of a Hong Kong US tax filing professional to reduce your burden. Moreover, these Hong Kong US tax specialists can also help you:

  • Exclude a portion of your earnings from US taxation of Hong Kong income
  • Use the documentation of already paid Hong Kong US tax to offset the tax on your overall earning for the taxation year
  • Avoid double taxation as well as hefty penalties for non-compliance of Hong Kong US expat tax by filing your eligible tax and returns on time

Now, you can take a sigh of breathing and can go through the different provisions for Hong Kong US taxation with no stress, knowing that you can utilize the years of expertise of US expat tax specialists in Hong Kong.

Let’s get started one by one.

  1. Expats are required to pay tax in Hong Kong

No matter where you live or work, as an American citizen, you are required to pay taxes. However, Hong Kong poses taxes on certain income generated there. You need to report the income which you’ve earned or derived from Hong Kong- where you work, do business, or render service during trips of more than 60 days.

  1. Tax rates in Hong Kong

In a country like Hong Kong, US expat income is taxed at either a progressive rate on net chargeable income or a basic standard rate of 15% on net income. Taxpayers are required to pay whichever the amount is low. 

  1. Hong Kong US tax rules

Unlike the US taxation year, which starts from January 1 to December 31,  the US taxation of Hong Kong income starts from April 1 to March 31. You are again required to keep this date in mind and must file the tax within the deadline with the sound knowledge and expertise of Hong Kong US taxation professionals.

  1. There is no totalization agreement 

Unfortunately, the United States has no tax treaty with Hong Kong, and that clearly means both the countries have no totalization agreement between them. Now, you may ask how a tax treaty can help you even if both the country permits this agreement? Tax treaties help the US expat to avoid double taxation as well as mandatory contributions to security systems.

  1. Exclude income from Hong Kong US tax

With the availability of provision called Foreign Earned Income Exclusion, or FEIE in short, US citizens are allowed to exclude up to $107,600 from taxes in the 2020 taxation year. However, to claim this exclusion, expats need to qualify for the Bona Fide Residency Test or the Physical Presence Test, that include:

  • Make your home overseas
  • Have to live there for continuous one entire tax year
  • Have no immediate purpose of returning to the US permanently

Once you pass these three requirements, you become eligible to claim for FEIE to reduce the amount from your Hong Kong earned income.

The desire of many US aspirants for living abroad is becoming an increasingly attractive option as it offers a luxurious lifestyle and income-earning opportunities. If you are also one of the aspirant’s desires to live in Hong Kong, taking care of your tax liabilities as well as eligibility criteria can feel like a complicated task. Knowing which Hong Kong US tax rules affect you and understanding your eligible options can help you in many ways to make your Hong Kong living experience hassle-free.

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