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?