How Working in Hong Kong Impacts Your US Expat Taxes
American citizens are obligated to file US expatriate tax returns with the federal government each year. In addition to the regular income tax return, you could also be required to file an informational return on your assets held in foreign bank accounts. While the US is one of the few governments that taxes the international income of its citizens and permanent residents, it does have provisions to protect us from double taxation. These include the Foreign Earned Income Exclusion, Foreign Tax Credit, and Foreign Housing Exclusion.
If you are an American living in Hong Kong, you need to know how this will impact your US expatriate tax returns. This short video will provide you with a glimpse of how being an American living in Hong Kong will impact your expatriate tax returns. More detailed information can also be found in our Country-Specific Guide to Hong Kong; click here to read it.
US Expat Taxes in Hong Kong
Do I need to file taxes if I’m living in the Hong Kong?
YES! US citizens are required to file and pay US expat taxes on worldwide income. It does not matter if you’ve already paid taxes to Hong Kong. You still must file US expat taxes.
First, let’s start with your Hong Kong filing requirements.
What tax rates can I expect in Hong Kong as a resident?
Taxable income in HK$ Tax Rate
0-40,000 2%
40,001-80,000 7%
80,001-120,000 12%
120,000 and above 27%
Who is a resident of Hong Kong?
- Hong Kong operates a Territorial Tax System. Traditional residency requirements do not apply – you are required to pay taxes if you earned the money in Hong Kong.
- If you are in Hong Kong for less than 60 days, you are not required to pay tax on your salary.
Is foreign income taxed in the Hong Kong? NO!
Hong Kong expats are only taxed on salaries they are either paid in Hong Kong or earned from services performed in Hong Kong.
Hong Kong Tax Year and Due Date
- Hong Kong tax year: April 1-March 31
- You will need to pro-rate your income and any taxes paid to Hong Kong for the US tax year on your US expat taxes.
- Hong Kong tax due date: The Inland Revenue Department issues returns in early may. They must be completed and submitted one month after receipt. If you do not get a return in the mail, you must notify the IRD by July 31.
- Hong Kong does not withhold taxes – these are paid in two installments. The first is 75% and the second is 25%. These are due in the final quarter of the year and just after the year ends, respectively.
Hong Kong Social Security
Hong Kong does not have a traditional social security system.
- They have the Mandatory Provident Fund, which provides a structure for privately managed funds to accrue for workers in Hong Kong. The minimum contribution is 5%, with a maximum annual contribution of HK$12,000.
- If you are temporarily in Hong Kong or keep paying into US social security, you do not need to make contributions.
More about taxes in Hong Kong
- Many taxes are absent in Hong Kong.
- Things like VAT, withholding taxes, capital gains taxes, sales taxes, or wealth taxes do no exist in Hong Kong.
- Hong Kong does have a Stamp Duty for transations related to property and stock.
Remember: lower taxes in Hong Kong could mean a higher tax liability in the United States!
Now, let’s move on to your US filing requirements!
US expat tax year and due dates
Tax year – January 1 through December 31
Key deadlines:
- April 17, 2012 – although expats get an automatic extension until June 15, if you owe any taxes, interest accrues starting April 17.
- June 15, 2012 – the US expat tax due date. Unless you’ve filed for an extension, you must file your expat taxes by this date.
- June 30, 2012 – FBAR (Foreign Bank Account Reporting) form due to the US Department of Treasury.
- October 15, 2012 – last due date for US expat taxes (if you filed for an extension).
US expat tax obligations
The US requires you to report your worldwide income on your tax return. All income is subject to taxation. However, the US has a number of provisions to help prevent double taxation. These include:
- The Foreign Earned Income Exclusion, which allows you to exclude up to $92,900 of foreign-earned income from your US taxes,
- The Foreign Tax Credit, which allows you to offset the taxes you paid to Canada with your US expat taxes, dollar-for-dollar, and
- The Foreign Housing Exclusion, which allows you to exclude certain household expenses that occur as a result of your living abroad.
Understanding your Hong Kong and US tax obligations is important.
Do you have questions? Contact an expert!
Greenback Expat Tax Services
We offer resources and services to help you:
- Learn more about how your US expat taxes are impacted when you live and work in Hong Kong by reading our Country-Specific Guide to Hong Kong.
- Discover more ideas on how to limit your tax liability by following Expatriate Tax Return Savings Tips on our website or by talking to one of our expat tax experts.
- File amended tax returns and forms easily, accurately, and in a timely manner.
If you have any more questions about your US expat taxes and their implications in Hong Kong, or if you’d like to enlist our help in completing your returns, please contact us.
