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US citizens buying/selling property in HK

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  1. #1

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    US citizens buying/selling property in HK

    was wondering if anyone here is familiar with taxes or other surprises that occur if a US citizen buys property in HK, or sells property in HK.

    We are looking at buying soon, and werent sure if we would be subject to additional taxes now when we buy, or later when we sell.


  2. #2

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    sorry...what i mean to say is.... i think in HK you are not taxed on capital gain / property sale. but in USA you are taxed on these things.

    so if i'm a US citizen buying property in HK, do I pay any US taxes for purchase?
    do i pay US taxes on the sale?


  3. #3

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    How would you structure it not to pay US capital gains tax?


  4. #4
    Quote Originally Posted by HongKongFoot:
    Having the property legally titled to a HK Based corporation or a BVI Corp would be the best way to avoid taxes on capital gains in the states. By no means am I suggesting that they evade taxes, I am suggesting better avenues to taxes.
    This should work if you're paying in full. You probably won't be able to borrow from the bank if the property is titled to a new HK/BVI company.

  5. #5

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    Sorry, but what you are saying is definitely tax evasion and against U.S. Law. If you have any type of controlling interest in that HK company or Virgin Island company (BTW who would buy HK property with a Virgin Island company if you are not going to try and evade taxes??) then you are required to pay U.S. taxes on it. Try to spin it anyway you want - you are breaking the law, and if found out by the IRS you can go to jail for a long time.



    SOME OF THE U.S. INTERNATIONAL TAX RULES AND REPORTING REQUIREMENTS

    Foreign Bank Account Reports (FBARs)- U.S. persons with signing authority or ownership in foreign financial accounts (with certain exceptions) are required to annually file Form TDF 90-22.1 if the aggregate value of all of the accounts combined (in U.S. dollars) exceeds $10,000 at any time during the year. The geographic location of the bank determines whether or not it is foreign. Therefore, a U.S. branch of a foreign bank that is responsible for IRS information reporting is not considered to be a foreign bank for purposes of filing Form 90-22.1. The penalty for not filing the reports could be as high as $250,000 and may possibly lead to criminal prosecution. Due by June 30 of each year and filed separate from the U.S. income tax return.

    Form 926- Americans who transfer money or certain other tangible or even intangible property to a foreign corporation may be required to file Form 926, especially if the transfer was made in exchange for ownership of 10% or more of the stock of the foreign corporation or if the amount or value exceeds $100,000 (aggregating within any 12 month period). The penalty for non compliance (except where there is reasonable cause) may be 10% of the value of the transfer or $100,000 (whichever is more). In cases where the IRS can prove intentional disregard of the rules the penalty could exceed this amount. In addition, the time in which the IRS can assess income tax against the taxpayer remains open until 3 years after the report has been filed. Due by the extended due date of the income tax return and filed with that return. Download Form 926 Instructions

    Form 5471 –U.S. persons who own stock in a foreign corporation, including officers and directors of such corporation, where ownership or voting control thresholds are met in cases involving foreign corporations controlled by U.S. persons need to file Form 5471. Both the rules pertaining to who is required to file the report and how the information reported in the report is determined is extremely complex making it imperative that the assistance of a tax advisor who specializes in U.S. international tax be sought. Failure to comply with the reporting requirements could result in an annual monetary penalty of $10,000 for each report not filed or filed incorrectly. Once the IRS contacts the Taxpayer regarding non compliance, the penalty could reach $50,000. Additionally, failure to file could result in loss of tax benefits relating to foreign tax credits. Due by the extended due date of the income tax return and filed with that return.

    Form 8858-Similar to Form 5471, this form is required to be filed reporting comparable information with respect to information pertaining to U.S. persons who own Foreign Disregarded Entities. A disregarded entity is a business comparable to a limited liability company or other association that has been elected to be disregarded for tax reporting purposes by a single U.S. owner. In addition to this form, Form 8858, Schedule M reports transactions between the disregarded entity and the U.S. owner or other related entities.


    Form 8865- Foreign partnerships and its U.S. partners are required to file Form 8865 and report information that is required to be included on the U.S. partnership return (Form 1065 and it’s Form K-1 partner information) as well as much of the information required by Form 5471. Due by the extended due date of the income tax return and filed with that return.


  6. #6

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    Quote Originally Posted by HongKongFoot:
    Totally irrelevant, go to the DOJ site for records, create and account and do a search. Do a query for the last 25 years and there are no court cases for amounts less than 1.5 mil USD.

    There is a new monitoring system in place and they are going after US Citizens in HK for smaller amounts. I know a guy who is in a load of trouble for not declaring his earnings and apartment in HK. The value of his assets are under a million HKD.

  7. #7

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    Quote Originally Posted by HongKongFoot:
    Totally irrelevant, go to the DOJ site for records, create and account and do a search. Do a query for the last 25 years and there are no court cases for amounts less than 1.5 mil USD.
    Not all IRS investigations go to court. A tax lien and audit can squeeze you and your appendages nicely enough.

  8. #8

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    Quote Originally Posted by HongKongFoot:
    Assuming he has a HKID, HK Proof of Address, then as far as HK Banking is concerned, he is a HK Citizen. The bank account (Personal / Business) would be registered under his HKID and there would be no reporting facilities back to the states.

    If I remember correctly, he is only a few years away from ROA. Assuming this, he would not have to worry about capital gains in the USA on any profit made for the appreciation of said property.

    Being hauled off to jail for non disclosure of foreign accounts is unheard of for amounts under 2 million US Dollars. A few hundred thousand, the IRS will not bother, especially if he has dual nationality and is the accounts and transactions are structured properly.

    Remember, he is talking about a few hundred K USD, not a few hundred mil USD, there is a difference. The US is filled with weird laws like you cannot wear shoes that have a heel taller than 2 inches unless you get a permit, or eating ice cream on public streets.

    One can look up all the Federal court cases for the last 15 years and no one has ever been prosecuted for a few hundred thousand.
    A couple things. First, it doesn't matter if he is a HK permanent resident, has dual citizenship, etc. If he is an American citizen, he owes capital gains on a property he owns, or his company owns, foreign or domestic. That is the bottom line. Having ride of abode, owning a foreign company, or having dual nationality is completely irrelevant and you obviously just made that up.

    Furthermore, you talk about only a "couple hundred thousand USD" as compared to a couple million. Tax evasion is tax evasion. It doesn't matter if it's only "a couple hundred thousand dollars" (which by the way is still a lot of money). You are placing an additional burden on your fellow citizens and you're also stupid enough to talk about it on a public forum.

    If I were you, I would stop making things up and stop talking about illegal activities on a public forum.

  9. #9

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    Last edited by fth; 12-10-2010 at 06:09 PM.
    thorn likes this.

  10. #10

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    HSBC has handed over customers' records to the IRS.

    "We’ve been telling our clients that the non-disclosure of foreign accounts is not just a UBS problem,” said tax attorney Richard Sapinski of Sills Cummis & Gross in Newark, New Jersey, who represents clients in the offshore investigation ...

    “We’ve spoken to the prosecutors and high-level people in the IRS, and our conclusion was they were going to pursue people with undisclosed foreign accounts anywhere for a very long time to come,” he said.

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