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US Taxes - American working in Japan and Moving to HK (Any Benefit?)

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  1. #1

    US Taxes - American working in Japan and Moving to HK (Any Benefit?)

    I'm hoping to find someone else on this forum who is American and previously worked in Japan and moved to HK. I'm curious if I can expect an increase in tax savings as a resident of HK compared to Japan. Let me explain the background to this question.

    I am currently living and working in Japan. I will most likely be relocating to Hong Kong (local contract to local contract move). Salary/compensation will more than likely stay the same. So to make things simple, let's just assume my salary is based on a US dollar amount and currently converted to JPY. Upon moving to HK, the same US dollar amount will be converted to HKD and that will be my base compensation. I don't know if this will be a good or bad thing for me (as obviously HK apartments are much higher in rent compared to Tokyo), but perhaps other costs are lower and it will balance out? I guess this is a separate question to this post, but if anyone wants to add comments on that, I'd appreciate it to.

    So assuming, for the US tax purchases, my yearly take home amount is the same. What I would like to know is, after all is said and done, and taxes paid, will I end up having kept more of my money earned for the year being a HK based employee or Tokyo.

    In Japan, the tax rates are similar to the US, so more than likely you won't owe taxes to the US government, because you will have paid the rate percentage on your income similar to what the US worker would be paying (the requirement of being a US citizen - which all of us overseas workers obviously dislike).

    Now, in HK, the tax rate is 15%, that's all nice and good, however being a US citizen, the IRS still requires us to still pay what they consider our fair share. So if our tax bracket and liability at our income level in the US is 40%, then we would technically still owe the difference (40-15 = 25% tax liability). Now, there are other benefits, which we take advantage of, such as the foreign earned income credit and the housing allowance deductions, which lower the taxable amount. But I'm unsure how that all plays out given HK's tax rate is say 15% versus what one would pay in Tokyo (30-40%). So in the end, would I keep more of my yearly earned income in HK compared to Japan, or would I end up paying the same amount in taxes overall and there is no benefit?


  2. #2

    Join Date
    Feb 2011
    Location
    Hong Kong
    Posts
    6,320

    US exempts first hk$1m plus housing premium so yes definitely you will save money. If your salary is highly over hk$1m then you will be paying those high taxes immediately with no tier benefits. You still save the taxes on the first hk$1m plus the housing benefit (taxed this portion at 10% in Hk -- tax exempt from US).


  3. #3

    Join Date
    Oct 2010
    Posts
    24,161

    Without the exact numbers, it is impossible to say. I have a couple of American colleagues who have worked in both places and they say they don't save any more money in HK then they did in Tokyo, because it gets swallowed up in the higher cost of living.

    Really depends - HK can be cheaper, but the answer is different to someone earning $2m/year vs $10/m a year.

    shri likes this.

  4. #4

    Join Date
    Sep 2017
    Location
    Mid-Levels
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    If you are paying 30-40% tax in US, that puts you in a high income category, however for simplicity lets assume you gross US200k filing single with no itemized deduction.

    HK taxes = 15% of your equivalent salary in HK.(US30k equivalent in taxed paid to HK).
    US taxes = 200 - 102 (exemption) - 25 (housing allowance assuming you will live in a place which will allow you to maximize this allowance) = 73k, which will be taxed at 33%. This gives you a US tax bill of US24k.

    Total $54k on 200k salary = 27% (very simple calculation since this does not take into account standard deduction, personal exemption, deduction/credit for taxes paid to HK).

    PS: I am liable for US taxes, and this is just what I can infer from reading the code.

    shri likes this.

  5. #5

    Great comment! Very easy to follow explanation. I guess we have to go back to the white board and reanalyze all this after (if) Trump's administration passes this new tax plan


  6. #6

    Join Date
    Mar 2010
    Posts
    6,514

    Do you have any other income ?
    HK has no double tax treaty with US.