Everything to Know About Taxes in Hong Kong for Expats

Many expats find themselves landing in Hong Kong for various types of work. Here's what you need to know about taxes in Hong Kong to avoid problems.

Did you know that there are more than 8.7 million American citizens that are living abroad in more than 160 different countries? Now is one of the best times for choosing to live abroad as more and more jobs are allowing for remote work.

Hong Kong is one of the top destinations for American citizens to live abroad but it is important if you choose to follow that path that you understand how taxes in Hong Kong work. This means understanding tax rates, the income tax, and how to file taxes while you’re living in this beautiful corner of the world.

The good news is that you’re in the right place for a helpful guide to calculate income tax and file your taxes in the right way. Keep reading this article to learn more.

Information for Taxes in Hong Kong for U.S. Citizens

It might seem like you don’t need to continue to file taxes with the United States government if you’re living abroad in places like Hong Kong or Thailand. Even if you’re not living in the United States, it is still a wise move to continue filing your taxes with the Internal Revenue Service.

If you’re only living or staying in Hong Kong for a short time but you’re performing work while you’re there then you’ll need to report the money that you made there to the United States government when tax season rolls around. It is also possible that you’ll need to report your assets and your Hong Kong bank accounts when you file taxes.

U.S. citizens and Green Card holders that have more than $10,000 in a foreign bank account are required to report that money to the IRS for tax reasons. The good news is that there are strategies that you can use to avoid getting taxed twice.

The first option at your disposal is going with the foreign earned income exclusion. Doing this will allow you to exclude the wages that you’ve earned abroad from the taxes that you file to the United States government. In order to qualify for this option, you’ll need to meet certain requirements for residency or time spent in that country. 

There is also the option of going with a foreign tax credit. Taking this route is beneficial because it allows you to claim a credit from the IRS on taxes that you’ve paid to a foreign government. Going this way will keep you from paying taxes to both the Hong Kong government and the United States government.

Hong Kong Tax Considerations

There are certain things that you need to consider for filing your taxes in Hong Kong. The main way that the Hong Kong government goes about taxing ex-pats is to focus on the income earned within its borders versus the time that you’ve lived there.

If you’re an ex-pat living in Hong Kong then you should expect to get taxed on income earned, pension income, business profits, and rental income. The tax rates in Hong Kong will range between 2 percent and 17 percent depending on a number of factors.

The good news is that the tax rates in Hong Kong are comparatively low compared to those in the United States of America. If you’re a dual citizen or you have residency in Hong Kong then you could be better off filing your taxes through Hong Kong rather than the United States. Check this link for more on withholding tax in Hong Kong.

You also need to think about when the tax year starts in Hong Kong if you’ve never paid taxes there and are unfamiliar with the tax season. The tax season ends on March 31st in Hong Kong and the new tax season gets started on April 1st. You’ll have around a month to file your taxes to file your individual income tax.

It is a good idea to find a way to calculate income tax based on how much money you’ve made when you’re filing your taxes in Hong Kong.

Other Considerations for Taxes in Hong Kong

There are some other things to keep in mind if you’re planning on moving to Hong Kong and working there. The United States does not have a tax treaty with Hong Kong which means that there is nothing in place with either government to help you avoid getting taxed twice.

If you’re planning on moving to Hong Kong then it could be worth your while to find a tax expert that will help you avoid paying taxes in two separate countries on one income. You also need to keep in mind that you can deduct a ton of money from your taxes with the United States government thanks to the cost of living in Hong Kong.

The IRS will allow you to exclude up to $114,000 from your taxes for use on living expenses in Hong Kong. That is a massive amount of money compared to most other parts of the world so you need to make sure that you make the most of that opportunity.

That exclusion will cover everything from covering your rent, paying for gas for your automobile, your water bills, and even home repairs. You’ll get to set a lot of money aside to pay your utility bills throughout the year.

One other thing to think about is your state taxes depending on the state that you’re from in the United States. There are states that will continue trying to tax you after you’ve moved abroad. Make sure that you’re reporting any money that you have in foreign banks if you want to avoid frustrating and costly penalties.

Now You Know How to Go About Taxes in Hong Kong

Living abroad is an amazing experience that everyone should try at least once in their lives. One thing that makes it difficult is how to file taxes while abroad. Hong Kong is an amazing place to live but you need to know about taxes in Hong Kong because you make the move. Learn about the tax rates and try to find ways to avoid getting taxed by the IRS and Hong Kong.

For more helpful articles, check out our blog today!

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