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US citizen looking to work in HK, some questions

US citizen looking to work in HK, some questions

Old Apr 6, 18, 6:57 pm
  #1  
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US citizen looking to work in HK, some questions

I am an US citizen (and only US citizen) looking to work in HK. However, I wanted to get information the expats and the informed folks here… Question mainly are around tax.



1. I understand there is a Foreign earned income exclusion (IRS 2555) and that this exclusion has two similar qualifications. Excluding the partial tax year (the year I move to HK,) will I qualify for FEIE? Are the only qualifications of FEIE how much time you stay/work in the foreign country? i.e. if I move and start work in HK in 9/2018, for the 2018 tax year, I would pay regular US tax rates (less taxes paid in HK for 9-12/2018), but for 2019 tax year, I would qualify for FEIE? How does local taxes paid for 2019 working year affect US taxes?

2. If I qualify for FEIE, can I still deduct housing cost (if it’s more than 16% I read)? How does that interact with paid HK tax?

3. Am I misinformed on 1 and 2? For a very long time I was under the impression that as an American, if I work abroad, I would have to pay US taxes as I would if I worked in the US. Is this conditionally false?

4. Are there any impactful tax regulations I am not aware of that may help or hurt me? Points above are roughly all that I know about expat taxes.


Thanks in advance for the info!

EDIT: no spouse/married-filing related complication.

Last edited by bluegatorade; Apr 6, 18 at 11:19 pm
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Old Apr 6, 18, 9:00 pm
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I was a US citizen working in China. It was very complicated. I ended asking my CPA who has many US clients in China. I would suggest you do the same. In general:
* If you are not in a foreign country for a whole calendar year, probably only foreign tax credit is applicable. Note that there is a SEPARATE foreign tax credit alternate minimum tax.
* If your spouse remains a resident of a US state, you probably still need to pay state tax.
* Note that even if you reside in a foreign country for a whole year, housing and transportation allowances may still be taxable.
* You need to keep track of the travel for the entire year down to the dates.
* I believe foreign residence means < 30 days in US (you may want to take a tax home test to see if you can qualify for bona fide presence or physical presence), counting from the departure from a foreign country to arrival (not arrival in US to departure).
* As you will have a foreign financial account, you may have to file FBAR. If you have some ownership of a foreign company, you may have to file Form 5471, I file both every year.
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Old Apr 6, 18, 11:21 pm
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Thanks cxfan. I do plan to be in the foreign country for more than 330 days/year, which I understand to be a requirement to qualify for FEIE. Does filing FBAR complication US taxes?

Also, how does FEIE affect social security/medicare taxes? Are those contributions still made despite qualifying for FEIE, or are those contributions only on the income excluding FEIE income?
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Old Apr 7, 18, 1:58 am
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As said, this is all too complicated to cover in a short forum post! You need to sit down and talk with a knowledgeable expert.

But to mention a few points:

First, the earned income exclusion is only for earned income, that is income earned from working overseas, and it's capped at around $90,000/year (the cap moves up with inflation).

Second, you may qualify for the exclusion in your first, partial year, since the 330/360-day test is applied on the basis of a rolling period of 360 days, not a calendar year. But if you qualify in a partial year, the cap mentioned above is pro-rated.

Third, you pay Social Security tax if you are self-employed overseas, or working as an independent contractor. You also pay it if you work overseas for a U.S. corporation or partnership. And you pay it too if you work overseas for a foreign subsidiary of a U.S. company if the company has made a certain election. You do not pay Social Security tax if you work for a HK company with no U.S. connections, for example.
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Old Apr 7, 18, 2:32 am
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Originally Posted by bluegatorade View Post
Thanks cxfan. I do plan to be in the foreign country for more than 330 days/year, which I understand to be a requirement to qualify for FEIE. Does filing FBAR complication US taxes?

Also, how does FEIE affect social security/medicare taxes? Are those contributions still made despite qualifying for FEIE, or are those contributions only on the income excluding FEIE income?
Filing FBAR will not add to your tax. However, if you fail to file, there can be harsh penalty.

Originally Posted by 889 View Post
Third, you pay Social Security tax if you are self-employed overseas, or working as an independent contractor. You also pay it if you work overseas for a U.S. corporation or partnership. And you pay it too if you work overseas for a foreign subsidiary of a U.S. company if the company has made a certain election. You do not pay Social Security tax if you work for a HK company with no U.S. connections, for example.
That is what I understand. If a US taxpayer works for a US company/subsidiary and if it withholds, then FICA is applicable. For self-employment, the taxpayer will be paying FICA through Schedule C or E.
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Old Apr 7, 18, 7:31 am
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Could I suggest that the forums at http://geoexpat.com might get you much more extended and useful discussion than here? Many American citizens gripe at length over there!
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Old Apr 8, 18, 6:53 pm
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Okay serious question - who do I sit down with in the US to discuss these? Are H&R block people a good start? What company has multinational personal tax accountants available in the US?
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Old Apr 8, 18, 8:41 pm
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Because of the complications that US taxation causes, some US companies based in Hong Kong will provide free tax/accounting services for their US expats. See whether that would be available in your package (assuming you are looking to work for a US company in Hong Kong).

One of the other "joys" of being a US citizen in a foreign land is trying to open a bank account.
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Old Apr 8, 18, 11:33 pm
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Originally Posted by bluegatorade View Post
Okay serious question - who do I sit down with in the US to discuss these? Are H&R block people a good start? What company has multinational personal tax accountants available in the US?
I don't know about your situation, but mine is too complicated for H&R block.
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Old Apr 8, 18, 11:40 pm
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Originally Posted by DragonSoul View Post
Because of the complications that US taxation causes, some US companies based in Hong Kong will provide free tax/accounting services for their US expats. See whether that would be available in your package (assuming you are looking to work for a US company in Hong Kong).

One of the other "joys" of being a US citizen in a foreign land is trying to open a bank account.
Brokerage firms in HK (including those in banks) do not usually welcome US citizens. Even life insurance agents do not like to deal with US clients. Bank accounts are still okay, but my bank started to ask about our US tax information. That was probably for FBAR and interest reporting.
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Old Apr 9, 18, 12:49 am
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It's impossible for an American to open a brokerage account in Hong Kong, except perhaps at US brokers like Schwab.

If you've got a HK address and a work visa (and sometimes if you haven't), you'll be able to open a personal bank account, though. Get a credit card, too, maybe. A card with Octopus function that automatically refills will make your life in HK a breeze.

Hong Kong now enforces both CRS and FATCA, so you'll need to provide your US tax number. Finally, note that some banks are notoriously fussy and unwelcoming when it comes to new account holders. Like that big one with branches everywhere.

Of course you can find good professional tax advice in Hong Kong. But as you are about to discover, Hong Kong is a very expensive city. As said, tax advisors in most big accounting firms provide this advice to employees of their corporate clients, with the employer picking up the tab.

Note that if you're working for a big multinational, it may have a tax equalization plan for its employees. Under such a plan, the employer adjusts your salary up or down so that when all is said and done, your net pay overseas is the same as it would have been if you were working in your home country. The employer's accountants take care of computing your tax and making the salary adjustments.

Last edited by 889; Apr 9, 18 at 1:00 am
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Old Apr 9, 18, 12:58 am
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These tax advisory recommendations all seem to be post-interview/offer. For someone just starting to do research, who can I consult with? And I do plan to work for a multinational bank. Perhaps not a US bank but definitely not a HK regional bank.
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Old Apr 9, 18, 1:08 am
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It would take someone far braver than I to give you a name. A forum like this isn't the place for that. Much better you ask around personally in HK and get two or three names. To repeat, it will not be cheap!

You'll also want some advice about HK taxes. Especially if you'll be travelling on business outside HK a lot, there may be some HK tax advantage in structuring your initial employment agreement in a certain fashion before you arrive HK.
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Old Apr 9, 18, 4:13 pm
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Originally Posted by 889 View Post
It would take someone far braver than I to give you a name. A forum like this isn't the place for that. Much better you ask around personally in HK and get two or three names. To repeat, it will not be cheap!

You'll also want some advice about HK taxes. Especially if you'll be travelling on business outside HK a lot, there may be some HK tax advantage in structuring your initial employment agreement in a certain fashion before you arrive HK.
I did not mean to ask for a specific tax consultant but a company that does this... I don't know too much since my US taxes have never been so complicated.

My work will not involve traveling outside of HK.
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Old Apr 9, 18, 4:48 pm
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Originally Posted by bluegatorade View Post
I did not mean to ask for a specific tax consultant but a company that does this... I don't know too much since my US taxes have never been so complicated.

My work will not involve traveling outside of HK.
You should discuss with a tax consultant who specializes in foreign income in your local area. Perhaps there is someone who can provide a free 30-60 minutes session. Unfortunately you will likely run into many scenarios that he/she cannot explain all to you. You can Google for foreign earned income tax specialist. Perhaps you can find some answers before reaching a consultant.
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