U.S. Hong Kong Tax Treaty: Although, the U.S. has entered into nearly 60 income tax treaties with other countries, as of 2020, the United States and Hong Kong have not entered into a bilateral tax treaty. Still, the IRS general international tax laws apply to US person with Hong Kong assets, or Hong Kong persons with US Income.
US Hong Kong Tax Treaty
There is no U.S. Hong Kong Tax Treaty. But, even though the U.S. and Hong Kong do not have a bilateral tax treaty in place, if a U.S person (Citizen, Legal Permanent Resident or Foreign who meets the Substantial Presence Test) has Hong Kong Assets and/or income — they may have to report to the IRS.
The U.S. follows a worldwide income tax model. That means that U.S. persons are taxed on their worldwide income. Even if the income is earned or sourced from Hong Kong, it is taxable in the U.S. – unless a limitation, exception or exclusion applies.
A person may qualify for the Foreign Earned Income Exclusion or Foreign Tax Credit.
Hong Kong Double Taxation Agreements
Without a Hong Kong U.S. double tax treaty, the general IRS tax and reporting rules apply. Hong Kong has entered into several double tax treaties with other countries. Therefore, if you are a Hong Kong resident or citizen with investments in other countries, you should check the with Hong Kong to determine your potential tax liabilities, exceptions and exclusions.
As provided by the Hong Kong Inland Revenue Department:
- Comprehensive Double Taxation Agreements: Hong Kong has entered into Comprehensive Double Taxation Agreements / Arrangements (DTAs) with a number of jurisdictions. DTAs are also referred to as tax treaties.
- They prevent double taxation and fiscal evasion, and foster cooperation between Hong Kong and other international tax administrations by enforcing their respective tax laws.
- You will only be affected by a DTA if you are a resident of Hong Kong or the other DTA jurisdiction.
- Generally, Hong Kong’s DTAs operate to:
- reduce or eliminate double taxation caused by overlapping tax jurisdictions;
- provide a level of security about the tax rules that will apply to particular international transactions by –
- allocating taxing rights between the jurisdictions over different categories of income,
- specifying rules to resolve conflicting claims about the residential status of a taxpayer and the source of income,
- providing an avenue for a taxpayer to present a case to the relevant tax administrations if a taxpayer considers there has been taxation treatment contrary to the terms of a DTA;
- prevent avoidance and evasion of taxes on various forms of income flows between Hong Kong and the DTA partners by –
- providing for the allocation of profits between associated enterprises on an arm’s length basis,
- providing for exchange of information between the respective tax administrations;
- facilitate investment, trade, movement of technology, and movement of personnel by reducing rates of foreign withholding tax.
Hong Kong Asset, Account & Investment Reporting
For U.S. persons with Hong Kong assets, investments, accounts and/or income, they may also have a reporting requirement.
Some common examples of Hong Kong reporting include:
- Hong Kong Bank Accounts
- Hong Kong Investment Accounts
- Hong Kong Stock and Securities
- Hong Kong Pension and Retirement Accounts
- Hong Kong Assets
- Hong Kong Life Insurance
Some common examples of common reporting forms, include:
- FBAR (FinCEN Form 114): Foreign Bank & Financial Accounts
- FATCA (Form 8938): Specified Foreign Financial Assets
- Form 3520: Foreign Gift, Trust or Inheritance
- Form 3520-A: Foreign Trust
- Form 5471: Foreign Corporation
- Form 5472: Foreign Owner of U.S. Corporation
- Form 8621: Passive Foreign Investment Companies
- Form 8865: Foreign Partnership
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