At Taxes for Expats we have been preparing U.S. tax returns for U.S. Citizens and permanent residents living in Hong Kong for over 10 years. We have been checked by the State Department and are listed on the list of approved Tax Preparers by the US Consulate in Hong Kong. As a U.S. Citizen or green card holder you are legally required to file a U.S. tax return each year regardless of whether you already pay taxes in your residence country. The expatriate Foreign Earned Income Exclusion ($92,900 for 2011 and $95,100 for 2012) only can be claimed if you file your tax return on a timely basis. It is not automatic if you fail to file.
We have many clients living in Hong Kong and know how to integrate your U.S. taxes into the local income taxes you pay. Any income tax you pay there can be claimed as against the tax liability on your U.S. return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the calendar year as is standard in Hong Kong for U.S. tax purposes). You must, however, pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these form or file them late the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
We have helped hundreds of expats around the world catch up with their past U.S. taxes because they have failed to file U.S. tax returns for many years. This is, in fact, our specialty and we offer a 10% discount to clients to wish to file multiple tax returns at once and get in full compliance with the IRS.
Unfortunately, unlike Australia, Canada, U.K., etc. you must also file your taxes on worldwide income so long as you are a U.S. citizen or green card holder. You always have the option to give up your U.S. citizenship - by following proper IRS and State Department procedures you can surrender your U.S. Citizenship and therefore cut off your obligation to file U.S. taxes in the future. You must surrender the Citizenship for non-tax avoidance reasons and then can usually only return to the U.S. for no more than 30 days per year for the subsequent ten years. This is another service that we have provided many clients in the past.
Work with a recognized expert to help you prepare your American tax return. We can also provide tax planning and advice with other expatriate tax and legal concerns; we look forward to working with you.
Below we include information on the Hong Kong Tax System for American expatriates.
Comparison of Income Tax Rates
US Income Brackets and Tax Rates
| Marginal Tax Rate | Single | Married Filing Jointly or Qualified Widow(er) | Married Filing Separately | Head of Household |
| 10% | $0 - $8,375 | $0 - $16,750 | $0 - $8,375 | $0 - $11,950 |
| 15% | $8,376 - $34,000 | $16,751 - $68,000 | $8,376 - $34,000 | $11,951 - $45,550 |
| 25% | $34,001 - $82,400 | $68,001 - $137,300 | $34,001 - $68,650 | $45,551 - $117,650 |
| 28% | $82,401 - $171,850 | $137,301 - $209,250 | $68,651 - $104,625 | $117,651 - $190,550 |
| 33% | $171,851 - $373,650 | $209,251 - $373,650 | $104,626 - $186,825 | $190,551 - $373,650 |
| 35% | $373,651+ | $373,651+ | $186,826+ | $373,651+ |
Hong Kong Income Tax
Net Chargeable Income, i.e. assessable income after deductions and allowances, is charged at progressive rates as shown below. The amount of Hong Kong tax charged, however, shall not exceed the amount charged by applying the standard rate to the net total income, i.e. assessable income after deductions but before allowances. If you can negotiate the appropriate provision in your contract, your apartment rent may be used to offset some of your salaries tax,providing the lease is in your name.
Year of Assessment 2009/10
| Net Chargeable Income (HK$) | Rate | Tax (HK$) | |
| On the first | 40,000 | 2% | 800 |
| On the next | 40,000 | 7% | 2,800 |
| Total (example 1) | 80,000 | 3,600 | |
| On the next | 40,000 | 12% | 4,800 |
| Total (example 2) | 120,000 | 8,400 | |
| Remainder | 17% | ||
| Standard Rate of Tax | 15% |
Hong Kong Tax Basics:
- No sales tax
- No capital gains tax
- No VAT
- Maximum salary tax of 20%
- Profit tax maximum of 16%
- Tax rates are extremely low by OECD standards. (See below for further details). Taxation case law is minimal since the low tax rate means that the costs associated with challenging a decision of the revenue authorities usually outweigh any monetary gain.
- Taxes are levied according to the "territorial principle"" meaning that taxes are only levied on income "derived from or arising in" Hong Kong and not on income sourced outside the Territory.
- A number of taxes that exist in most jurisdictions do not exist in Hong Kong. Thus there are no capital gains taxes, no withholding taxes, no sales taxes, no VAT, no annual net worth taxes and no accumulated earnings taxes on companies which retain earnings rather than distribute them. In the long term it is intended to completely phase out stamp duty on the sale and issue of shares and securities and to reduce direct taxes further.
Corporate - The normal rate of Profits Tax is 16.5% for corporations and 15% for unincorporated businesses.
Capital gains - Hong Kong does not levy capital gains tax.
Indirect Taxes - Hong Kong does not levy value-added tax (VAT), goods and services tax (GST) or sales tax.
Other Taxes
- Estate Tax was abolished in 2005.
- Stamp duty on immovable property is charged at rates up to 4.25%, depending on the sale or transfer price of the property. However, to curb property speculation, the government introduced a Special Stamp Duty (SSD) on residential property in November 2010. Further measures to discourage speculation in the property market have not been ruled out by the government. Withholding Taxes - There are no domestic withholding taxes on dividends, interest or royalties
- Austria (January 1, 2011)
- Belgium (July 7, 2004)
- Brunei (December 19, 2010)
- Hungary (February 23, 2011)
- Ireland (February 10, 2011)
- Luxembourg (January 20, 2009)
- China (April 10, 1998, second protocol signed 2006)
- Thailand (December 7, 2005)
- Vietnam (August 12, 2009)
- UK (December 20, 2010)
- France (October 21, 2010)
- Indonesia (March 23, 2010)
- Kuwait (May 13, 2010)
- Liechtenstein (August 12, 2010)
- Mainland China (Third Protocol, August 21, 2010)
- Netherlands (March 22, 2010)
- New Zealand (December 1, 2010)
- Switzerland (December 6, 2010)
- Bangladesh - aviation
- Belgium - aviation
- Canada - aviation
- Croatia - aviation
- Denmark - aviation/shipping
- Ethiopia - aviation
- Finland - aviation
- Germany - aviation/shipping
- Iceland - aviation
- Israel - aviation
- Jordan - aviation
- Kenya - aviation
- Korea - aviation
- Kuwait - aviation
- China - aviation
- Mauritius - aviation
- Mexico - aviation
- Netherlands - aviation/shipping
- New Zealand - aviation
- Norway - aviation/shipping
- Russia - aviation
- Hong Kong - aviation and shipping
- Sri Lanka - aviation and shipping
- Sweden - aviation
- Switzerland - aviation
- UK - aviation/shipping
- US - shipping
The taxation system is administered by The Hong Kong Inland Revenue Department.
Hong Kong has a maximum average tax rate of 16 percent (marginal rates of 2%-17%). Due to the significant personal allowances and generous progressive tax rates most taxpayers pay less than the top average rate - government estimates show that fewer than 35 percent of all taxpayers are required to pay any salaries tax, with the top 100,000 taxpayers paying 60 percent of the total salaries tax due in Hong Kong.
Procedure & Timetable The Hong Kong tax year is 1 April to 31 March.
Tax reporting must be done on the specific tax return issued by the Inland Revenue Department (IRD), as this has a unique bar code. Income tax returns are typically mailed to taxpayers in early May and must be returned within one month after the issue date, although a time extension may be requested.
The IRD then reviews the tax return and issues an assessment approximately two months later. The assessment will indicate the tax for the current tax year and will include provisional tax for the next year - with the provisional tax usually being 100 percent of the tax for the current year. All assessments should be reviewed immediately to ensure they are correct because assessments are considered "final" if the taxpayer does not object within one month. It can be very costly if a taxpayer does not object in time as there is no way to undo a final assessment. Tax is payable according to the assessment and likely will be payable early in the following year in two instalments.
Appendix: Hong Kong Double Tax Treaties
Double taxation avoidance treaties are in force between Hong Kong and the following countries (with effective dates):