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I have an opportunity to work in Hong Kong and am wondering how my compensation will be taxed?

I am a United States citizen working on an assignment for a US multinational with a division in Hong Kong.
Expatriate Hong Kong
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Tax Professional Answers

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Robert Ferguson
As a US Citizen you have the opportunity to pay no US taxes. Primarily, if you are out of the country for a full year there is little or no federal or state income tax owed. The best way to understand what is and is not possible is to get the Instructions for Form 2555 from the IRS. You can get it by calling
1-800-TAX-FORM (1-800-829-3676).
Leave a Comment 445 weeks ago

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Chuck Heyde, CPA, CGMA
You will be taxed in both the US and Hong Kong. If you find the right individual to assist you with your tax preparation and planning, you will primarily pay taxes in Hong Kong because in the US you will likley exclude around $95K of income with the Foreign Earned Income Exclusion (form 2555) and/or tax foreign tax credits (form 1116) for the rest.

You can read more about the foreign exclusion here - http://gemms.us/tools/foreign-housing-exclusion-or-deduction

NOTE: If your company accumulates your compensation correctly, you should see a DRAMATIC increase in your W-2 because once your assignment exceeds one year, or is know it will exceed one year - everything paid to you, for you, or on your behalf becomes compensation. So moving expenses, housing, foreign taxes, etc.... will all be added to your compensation...

I recommend you ask your company for a Pre-Assignment Consultation (PAC) with their tax vendor. They should give you all the ins and outs.

Chuck Heyde, CPA
Expatriate Tax Specialist
www.GEMMS.us
Leave a Comment 443 weeks ago

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ZM Ishmurzina, CPA, MBA
There are several things that you should keep in mind.

1. If you meet either the physical presence test or bona fide residence test, you can claim the foreign earned income exclusion. If means that you can exclude up to $99,200 in foreign earned income on US tax return in a tax year 2014.

You can read about the Foreign Earned Income Exclusion and Physical Presence Test here
www.artiopartners.com/blog/foreign-earned-income-exclusion/
www.artiopartners.com/blog/physical-presence-test-expatriate-tax-returns/

2. Also, you can deduct certain foreign housing expenses by claiming the Foreign Housing Exclusion.
You can read about the Foreign Housing Exclusion here
www.artiopartners.com/blog/foreign-housing-exclusion-us-expat-tax/

3. Please note that the income tax rate in Hong Kong is much lower than in the USA. The maximum rate is 17% in Hong Kong. It means that if you might be subject to additional US taxes if your income exceeds the foreign earned income exclusion and foreign housing exclusion.

4. You might want to review your compensation package with your employer before taking an assignment.
Leave a Comment 349 weeks ago

 

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