Another tax question

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  1. #1

    Join Date
    Oct 2006
    Posts
    38

    Another tax question

    Hello,

    I have a tax question and would be grateful for any comments and advise.

    I am a US citizen living in HK. My US employer relocated me to work out of our HK office.

    I get paid out of the US office, and get issued a W-2. I contribute to my 401K plan, Social Security, and Medicare. I get issued a check every week for my NET earnings after the deductions for 401K, Social Security, and Medicare...

    My question is regarding my HK taxes. Our HK office is reporting to the IRD that they pay me my GROSS pay prior to the deductions for 401K, Social Security, and Medicare. I think (and hope) that this is incorrect and that they should only be reporting to the HK IRD my NET earnings after the deductions...

    Does anyone know what the law is or has anyone had a similiar situation?

    It seems strange that my taxable income in HK would be higher than my US taxable income...

    Best regards,

    Jake


  2. #2

    Join Date
    Jun 2005
    Location
    Hong Kong
    Posts
    23,205

    I believe that is correct. There are very few tax-free allowances in Hong Kong. MPF is one of the few but I guess you aren't paying that since you have the US-based equivalents. However, the overall level of tax is low (capped at 16%) and, as I understand it, you can claim an allowance for some of your HK income against US tax (is it US$85K from what I have read in other threads?).

    One way you can minimise your HK tax bill for the future is to get the amount you pay in rent defined as "housing allowance". If your employer is prepared to run a small amount of bureaucracy that can reduce your tax bill as described here: http://www.ird.gov.hk/eng/pdf/pam44e.pdf The flip side of course is that doing this might have some impact on bonuses if they are defined as a percentage of base salary before allowances.

    There are a few other pamphlets here which might be helpful: Pamphlet

    Last edited by PDLM; 07-02-2008 at 01:49 PM.

  3. #3

    Join Date
    Aug 2007
    Location
    Chai Wan
    Posts
    33

    Can anyone point me to a US tax professional here in HK, only been here a few months, but I have some very different extenuating circumstances?


  4. #4

    I am a CPA licensed in the US. I won't do your taxes, but I'm happy to answer a question or two if you PM me.


  5. #5

    Join Date
    Jan 2005
    Location
    Eastern District HK; NYC
    Posts
    153

    Penguin, go pick up turbo tax software and you should be fine in terms of doing your taxes on your own. I am an AICPA originally from NYC.

    Jake: PDLM suggestion is correct. another point is.. try to take the maximum advantage of the 85K tax credits for US expat working overseas. in the long run, you save more tax by earning HK based salary than the US based. again, that's another debate I am not going to get into. Uncle Sam is always out there. who knows the medicare and social security world in 2030??


  6. #6

    Join Date
    Oct 2006
    Posts
    38

    Whong and PDLM...Thanks for your comments...

    There is a lot to think about!

    Best regards,

    Jake