U.S. tax services for Americans in Hong Kong

Bottom line Often yes — with no treaty to fall back on, the FEIE and the foreign tax credit are the only shelter, and low Hong Kong tax leaves little to credit.

Often, yes. There is no US–Hong Kong income tax treaty, so there is no treaty relief to claim; the foreign earned income exclusion and the foreign tax credit are the tools you have. Because Hong Kong salaries tax is territorial and capped at roughly 15 per cent, the credit alone seldom eliminates the US bill. The exclusion covers much of a salary and the foreign housing exclusion helps with Hong Kong rents, but the sharpest mismatch is investment income: Hong Kong does not tax capital gains or most dividends and interest, so that income is fully US-taxable with little or no Hong Kong tax to credit against it. That is exactly where planning earns its keep.

Bottom line We treat it as a section 402(b) employees’ trust: employer contributions taxed as they vest, internal growth deferred until withdrawal.

With no treaty covering it, the MPF is analysed under domestic US rules. The position we take is that it is a section 402(b) employees’ trust: employer contributions are US-taxable when they vest, and because MPF vests immediately that is generally in the year contributed, but the internal growth inside the scheme is deferred until you withdraw rather than taxed each year. A separate rule, the section 402(b)(4) exception for highly compensated employees, can pull some of that growth into income sooner. Your own contributions come from already-taxed pay. The MPF is also reportable on the FBAR and Form 8938.

Bottom line Usually yes — the underlying funds are typically PFICs, and the wrapper often fails the US definition of life insurance.

Usually, yes. Investment-linked assurance schemes are marketed heavily to expats in Hong Kong, and for a US person they tend to raise two issues. The underlying funds are almost always passive foreign investment companies, which brings the punitive PFIC regime and annual Form 8621 filings, and the wrapper frequently fails the US section 7702 definition of life insurance, so it does not get the insurance treatment you were sold. We review the policy before assuming any of the tax deferral it appears to offer actually holds for US purposes.

Bottom line Usually Form 5471, and often GILTI or Subpart F income on your personal return — elections can change the result.

A Hong Kong company controlled by US persons is generally a controlled foreign corporation, which brings Form 5471 and, in many cases, GILTI and Subpart F income onto your personal return even when the company pays no dividend. Hong Kong only taxes the company on profits sourced in Hong Kong, so foreign-sourced profit that escapes HK tax can still be caught by the US rules. Elections such as the section 962 election or the high-tax exclusion can change the outcome, so both the reporting and the planning matter.

Bottom line If the failure to file was non-willful, Streamlined is generally three years of returns and six years of FBARs.

It is usually more fixable than people fear, and it is common here given how many accidental Americans and long-term expats never knew they had to file. If your non-compliance was non-willful, the Streamlined Filing Compliance Procedures generally require three years of returns and six years of FBARs, including your Hong Kong accounts and MPF. We review your facts and prepare the full package.