Take expat package OR a local hybrid? (American)

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  1. #1

    Take expat package OR a local hybrid? (American)

    i've agreed in principal to be relocated to HK, but i'm working out the details with my management before i sign the contract. the company is offering me a couple of choices: limited expat package or become a local HK employee with some kind of hybrid package. after reading some posts here, i'm really leaning towards being an HK employee and paid locally since:

    1. if i took the local HK employee route, i should ask the company to pay for the housing separately (instead of paying me X dollars increase to offset the rent).

    2. i should go with the MPF instead of getting paid in the US and contribute to the 401K (company match equivalizes so it doesn't matter where i put the money)

    3. if i'm paid locally then social security, medicare, and my state/county taxes won't be deducted. so the question is: do i pay SS/medicare at all? when i was self employed i don't think i've ever paid SS/medicare...state taxes is a different story.

    did that pretty much cover it?


  2. #2

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    I'm not familiar with the US tax issues, but on your first point, you should in either case get your Housing Allowance identified separately and get your employer to do the necessary bureaucracy for you to get the HK tax benefit from that. (You will be paying HK taxes in either case since that is where you will be employed.)


  3. #3

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    I'm an expat and my company pays the housing separately, I never see the money.
    Are you retiring in the US or HK? How easy does the MPF role back to the USA?
    No idea on the taxes, but my general feeling is Uncle Sam gets "his" money regardless.


  4. #4

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    I think if you go local package hybrid (we call it Local Plus) employers don't generally pay your rent but rather they add extra to your pay that is then meant to be used for this. I think it's best to do it this way anyway because then it's up to you how much you spend on your rent. If you decide to spend less on rent than your employer earmarked for it then that's money in your pocket.

    As for PDLM's comment, you simply supply your office with a rental slip, lease agreement etc and that way the money you pay on rent is only taxed at 1.5% (or whatever it is).


  5. #5

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    Quote Originally Posted by Sleuth:
    I'm an expat and my company pays the housing separately, I never see the money.
    But you do see the corresponding tax bill. At least if the company pays the housing directly then you can be sure that you will get the more favourable tax treatment.

  6. #6

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    Quote Originally Posted by PDLM:
    But you do see the corresponding tax bill. At least if the company pays the housing directly then you can be sure that you will get the more favourable tax treatment.
    True, but the OP point seemed to be that being a local employee allowed him to get the two separated.

  7. #7

    Thanks guys! I tried checking the tax dollar delta between getting a flat increase vs. having the company pay for housing at the HK's version of the IRS (IRD?), and the website tells me that company paid housing can't be more than 10% of my total income? With the housing costs as it is, I don't see how anyone can get by with 10% of their salary for housing.

    As for taking MPF back to the states: I figure I'll just leave the money in HK for a while. I heard you can't take the MPF with you unless you're of retirement age? Any exceptions? If I took it back home I'm sure it'll be taxed at normal income rate which would suck balls because the MPF agreement I got was supposed to be an equivalized version of my 401K.

    Do people just use TurboTax to do their US taxes or do people hire a CPA in HK to do their taxes?


  8. #8

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    I'm on the expat package and my taxes are too complex for Turbotax. Plus they are done for free back in the US.
    I have US guys doing the US taxes and HK guys doing the HK taxes.


  9. #9

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    Quote Originally Posted by casualsurfer:
    Thanks guys! I tried checking the tax dollar delta between getting a flat increase vs. having the company pay for housing at the HK's version of the IRS (IRD?), and the website tells me that company paid housing can't be more than 10% of my total income? With the housing costs as it is, I don't see how anyone can get by with 10% of their salary for housing.
    You've completely misunderstood the website. In essence, if the company pays you a housing allowance which they ensure is actually spent on housing (either by paying it directly to the landlord or by getting copies of your lease and receipts) then the taxable value of that housing will be 10% of the rest of your taxable income. It;s a slightly odd scheme because it means that the taxable value of your housing is independent of how much it actually costs, but that is the way it works.

    So, in a simple case, if you earn, say, HK$1M and are in addition giving housing by your employer then you will be taxed on an income of HK$1.1M regardless of how much the housing actually costs.