Everything You Should Know About US Taxation of Hong Kong Income – A Quick Reference Guide for US Expats

Being a US citizen or Long-Term Resident (LTR) or US Green Card Holder if you choose to live or work in Hong Kong, then get ready to bear certain legal responsibilities and be loyal to it:

‘Pay & file US taxation of Hong Kong Income as an expat’

Yes, if your worldwide income exceeds the filing threshold, you are required to file a US federal tax return each year. However, these incomes include:

• Wages/Salary
• Interest
• Dividends
• Rental Income

No matter whether you’re self-employed or work for a company, you will need to file a claim individually and pay the owed amount. For many Americans living abroad, the rules and regulations of Hong Kong, US tax can as expatriates are overwhelming and complicated. Even worse, if you fail to file tax correctly, it can result in several penalties or even legal repercussions.

Nonetheless, when strategically prepared and legally filed with the assistance of a skilled taxation professional, there are huge benefits designed specifically for US expats. 

In this post, we present a detailed guide to US taxation of Hong Kong Income

3 Important Facts about Hong Kong US Taxation System- Every US Expats Must Know

• Tax period of assessment: 1st April to 31st March
• Maximum rate of income tax: 17%
• Government body responsible: IRD (Inland Revenue Department)

Who Exactly Has To File Tax?

Not all, American expats owe Hong Kong US taxes. It applies only to two groups:

• American Citizen
• Green Card Holders

Who earn over $12,000 a year, or $4,000 of self-employment income are required to file a US federal tax return while reporting their worldwide income.

 Even folks living in Hong Kong who have never lived in the US or had an American passport- as they were born in the US while their parents were there temporary or having an American parent or grandparent are required to file US taxes. Such taxpayers are referred to as Accidental Americans.

How are US expat tax rates evaluated by the IRD?

Hong Kong tax is chargeable on the basis of the following two parameters:

1. Progressive tax rates on expat net chargeable income

2. At standard rates based on expat net total income,

Whichever the amount is lower from 1 and 2 that will be evaluated by the IRD as a chargeable income tax. Noted that such chargeable income includes salaries, wages, director’s fees, and allowances.

What are your tax obligations?

• If you’re employed by a Hong Kong company to work in Hong Kong, all your earning throughout the taxation period (including income that is attributable to services rendered outside Hong Kong) are taxable.
• If you’re assigned to work in Hong Kong by your overseas employer, then the income that is derived from the services you rendered in Hong Kong will be subject to taxation.
• If you work in Honk Kong less than 60 days during the year of tax assessment, you will be exempt from salary tax.

How can you calculate your tax liability in Hong Kong?

You can evaluate your tax liability under the Hong Kong salary tax or personal assessment provision by using the IRD Tax Calculator for the relevant year of assessment.

As you can see or may have heard, living abroad can be exciting, but at the same time meeting tax obligations as an expat is often complicated. Filing taxes from abroad has never been easier, and so filing Hong Kong US expat taxes. This is why you need to seek an experienced tax professional advice who make sure your tax filing process isn’t hard enough. Working with a recognized expat tax filing expert, moreover, avoid penalties, and possibly obtain a refund.