There's no hiding from long arm of the IRS
Tax evasion laws apply to US passport holders working in Hong Kong and green card holders, since United States citizens must pay tax on income earned anywhere in the world, whether they are living in the US or not. Non-payers face criminal prosecution.
'When you consider the number of Americans working in the financial sector in this city and other high earners, there's definitely a residual US tax liability over and above their Hong Kong tax liability,' tax consultant Kurt Rademacher says.
Those who owe US tax and who wish to participate in the IRS' 2011 amnesty, the Offshore Voluntary Disclosure Initiative, must pay a penalty of 25 per cent of the highest aggregate balance in their foreign bank accounts between 2003 to 2010. Under certain circumstances, this penalty may drop to either 12.5 per cent or 5 per cent.
They must pay back-taxes and interest for the period 2003 to 2010, as well as accuracy-related and/or delinquency penalties of 20 per cent of taxes due.
They must file all original and amended tax returns, and pay all taxes, interest and penalties by August 31 to benefit from the amnesty.
Americans in Hong Kong can make use of the foreign earned income exclusion, which is US$92,900 this year. If you have earned less than this you are exempt from paying tax, but you must file an exemption with the IRS.