Anyone ever heard of 'hypothetical tax' calculation?

[nina_70]

Applefan - I did think the China treaty covered HK, at least that's what our tax guys told us. I've been able to take the exemption and tax credits for last 2 years from here. In any case tax law is royally confusing and we may both be right!

WSinHKG - Good luck with the move. I think asking your company to run both scenarios is a good idea.

[applefan]

Nina - that's interesting....two different tax guys have told me HK is not covered under the Chinese treaty. One is my company's tax guy and the other one was my own tax guy... I'm supposed to meet with my company tax guy here in HK at some point. Definitely have to ask and find out!!

[HKFella]

Agree that hypotax is based on what's agreed between you and your company. In our co's expat policy (Canada - which like most of the world except US - taxes on tax-resident status not citizenship)*, the hypotax is on base pay plus bonus less standard credits/deductions. Any allowances, cost-of-living adj, etc which are directly a result of being posted overseas (or incentives therefor) are outside this hypotax calculation and thus tax-free to the employee. Don't know if US tax complications negate any of this, but you may wish to consider if it's worth using/quoting this principle to your advantage in your discussions with the accountants.


*Though this issue is under hot debate coz of recent urgent evacuation by Cdn govt at taxpayers' expense of loads of long term Lebanon residents holding Cdn passports.

[nina_70]

Applefan - Definitely let me know what they say! For reference, the guys I used were Price Waterhouse. Now, the other idea I had...is it possible that I got the tax treaty thing wrong, but that you can still claim tax exemption and tax credits in HK anyway? I know my last few years of forms claimed them, but with US tax law that's no guarantee it's right. Anyway, I'd be interested to see if your guys concur or not. Keep us informed.

[applefan]

Nina: We use PWC as well. Just spoke to the guy and will be meeting with him on Monday. However, he said he could only help me with HK tax and the US part is still done by his colleagues in the U.S. I did meet with the guy in the US before I moved but the guy wasn't very good at answering my questions and has since left. The HK guy said he'd collect all my questions and send them to the US office so I might not have any answers for a while especially given the long wekeend there... Will keep you posted.

[nina_70]

Applefan - Ahhhhh...the plot thickens. I had exactly the same experience as you with Price Waterhouse. US guys were not very good at answering questions, and the HK guy ONLY deals with HK tax. PWC are good corporate tax guys, but tend to be so-so with individual tax returns (we only used them because it was a required part of our deal here). Well, it'll be interesting to see what happens. I wonder if they'll answer your questions the same way they did with us...? Let us know!