U.S. tax services for Americans in Hong Kong

Bottom line Often, yes. Hong Kong and the U.S. do not have an income tax treaty, so U.S. citizens generally rely on the foreign earned income exclusion, foreign housing exclusion, and foreign tax credit to reduce their U.S. tax.

Hong Kong’s salaries tax is generally lower than U.S. tax rates, so foreign tax credits may not fully offset U.S. tax. The foreign earned income exclusion can reduce U.S. tax on qualifying employment income, while the foreign housing exclusion may provide additional relief for qualifying housing costs.

Investment income can be different. Hong Kong generally does not tax capital gains, and certain dividends and interest may not be taxed. This can result in U.S. tax with little or no Hong Kong tax available for a foreign tax credit.

Your U.S. tax position depends on your income and circumstances, so both your Hong Kong and U.S. tax positions should be considered together.

Bottom line MPF may have U.S. tax implications when contributions are made and when benefits are received, and the treatment can depend on the specific circumstances.

For U.S. tax purposes, MPF is generally analyzed under the rules that apply to foreign retirement arrangements, including Section 402(b). Employer contributions and the investment growth within the plan may have different U.S. tax treatment. Special rules can also apply to highly compensated employees.

Your own MPF contributions are generally made from income that has already been subject to U.S. tax. The MPF account may also have separate U.S. foreign account reporting requirements, including FBAR and Form 8938.

We review your MPF arrangement and contribution history to determine the appropriate U.S. tax treatment and reporting.

Bottom line It may create additional U.S. tax and reporting requirements. The treatment depends on the policy structure and the investments held within it.

For U.S. tax purposes, an investment-linked assurance scheme (ILAS) should be reviewed carefully. The underlying funds may be treated as PFICs, which can result in additional tax and Form 8621 reporting. The policy itself also needs to be reviewed under the U.S. life insurance rules, including Section 7702.

The tax treatment offered under the Hong Kong policy does not necessarily apply for U.S. tax purposes. We review the policy and its underlying investments to determine the U.S. tax treatment and reporting requirements.

Bottom line You may need to file Form 5471, and the company may also create GILTI or Subpart F income for U.S. tax purposes.

If you are a U.S. citizen or green card holder who owns or controls a Hong Kong limited company, the company may be treated as a controlled foreign corporation (CFC). This can require Form 5471 reporting and may result in GILTI or Subpart F income being reported by the U.S. owner, even when no dividend is paid.

Hong Kong generally taxes companies based on Hong Kong-sourced profits, so income that is not taxed in Hong Kong may still have U.S. tax consequences. Depending on your circumstances, elections such as Section 962 or the high-tax exception may affect the U.S. tax treatment.

We review the company structure, ownership, and income to determine the applicable U.S. reporting and tax requirements.

Bottom line If your failure to file was non-willful and you meet the other requirements, you may be able to use the Streamlined Filing Compliance Procedures to catch up.

Some U.S. citizens and green card holders living in Hong Kong only become aware of their U.S. filing obligations after living abroad for many years. If you qualify for the Streamlined procedures, you generally need to file three years of tax returns and six years of FBARs, along with any other required international information reporting.

We review your filing history, Hong Kong accounts, MPF, investments, and other foreign assets to determine which filing procedure may apply and prepare the required filings.