Tax implications

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  1. #1

    Join Date
    Mar 2007
    Posts
    2

    Tax implications

    Hello everybody

    First of all, let me congatulate you all on a fine forum. The "tone" of this forum seems so much more friendly and helpful than so many others.

    Now my problem.

    I have been offered a temporary job (about 1 year) in a Hong Kong by a large reputable multinational company. However they have told me that I need to be sponsored to obtain a visa, and that they will not sponsor me directly. They will use a third party to sponsor me, and from what I understand, I will be taken on as salaried staff of the third party.

    To be honest the relationship between me and the third party is somewhat vague, Everybody seems helpful so Im cautious but not worried about jumping too quick.

    However, my wife and children will stay in Europe, and as we own a house I will find difficult if not impossible to get non-resident status. My HK salary will therefore be exposed to HK tax, and as there is no tax treaty, to horrendous (and that's putting it politely) very socialist European income tax too.

    What I have suggested therefore is that I go on a split.
    Some pay as local salary, and the rest to my own company where I will be able to dribble the money out of the company over a longer period of time to keep my marginal income tax rates down.

    So the questions for the panel are :
    is this scheme legal? I've already read here that it will probably not be if my company is based in HK as I will not be allowed to work for it, but I suppose if my company is offshore (as far as Hong Kong is concerned) it should not be a problem.
    is the scheme absurd?
    do you have a better idea?

    Many thanks for your advice.


  2. #2

    Join Date
    Mar 2007
    Posts
    26

    You have to be careful about double taxation issues whereby you pay additional tax on funds remitted to Europe (where tax is higher). From what I know you always pay the higher of any 2 tax rates (your own country and the foreign country). Therefore, although you may be taxed less in HK any money you bring into your own country you may be liable to pay the difference. I suppose your family who will be staying behind in Europe will depend on your funds to live so do check carefully because it makes a huge difference to your net pay.


  3. #3

    Join Date
    Jun 2005
    Location
    Hong Kong
    Posts
    23,207

    I don't think where the money is paid is relevant - it certainly isn't in UK or HK taxation. If you are resident in HK (i.e. you have an Employment Visa and HKID) and paid for employment in HK then you will be liable for tax in HK on all of that salary, regardless of whether it is paid in HK or elsewhere (I and many other expats are/were paid almost entirely in our home countries, but no tax is liable there (for the UK at least) on salaries from employment while resident overseas.

    I'd be surprised if simply owning property in Europe maintained "residence" status. That certainly wouldn't be the case for the UK. Obviously your wife is resident there, but not you.

    But we'd need to know which European country to give specific advice.


  4. #4

    Join Date
    Mar 2007
    Posts
    26
    http://www.hmrc.gov.uk/pdfs/ir20.htm#leaving

    will be useful to you assuming you are from the UK

  5. #5

    Join Date
    Jul 2006
    Posts
    67

    In most countries in Europe you pay taxes based on where you stay, that means if you stay in Hong Kong, pay Hong Kong taxes and have temporary citicenship you will only pay Hong Kong taxes, except property tax on you house. The US is the only country where you pay taxes based on your nationality. I am sure it will be worthwile to consult a tax expert.


  6. #6

    Join Date
    Mar 2007
    Posts
    2

    Thanks four input everybody; you have all been very helpful.