Break free from foreign tax shackles and embrace Hong Kong's low rate
Melanie Nutbeam, a certified financial planner based in Hong Kong, addresses common personal finance queries. Send your questions to [email protected]
Yes, forget the parallel life you might be living elsewhere and embrace Hong Kong. It has much to offer, not least financially. Chances are, it will hijack you the way it has others, and you might be here a very long time. Resistance usually proves a waste of precious pleasure time.
Make sure you have slipped off the shackles of tax-residency elsewhere, taking expert advice on this if necessary. US citizens have a hard time, as American shackles are tight wherever they live. For most of the rest of us, once we are no longer tax resident elsewhere, it is only income and gains on assets left behind that might be subject to tax there.
For those assets left behind, out of sight is not out of mind. File any required home tax returns each year, and budget for supporting cash and tax flows, especially on rented properties.
Once you are clear of other jurisdictions, Hong Kong is refreshing. Sure, accommodation is expensive, but you are only taxed on income earned in the SAR, not elsewhere. Income tax, at a maximum of 15 per cent, is strikingly modest. Added to that is the delight of completing a Hong Kong salaries tax return in a mere 15 minutes. It is also not uncommon for the government to pay a dollop of cash back to everyone. A pitfall is spending your tax money, as employers are not required to remit tax as you earn. You can use the tax reserve certificate scheme to pay tax as you earn to keep things clear.
It takes a little while for newcomers to appreciate that tax on investment earnings here is virtually non-existent. You might consider moving your assets to Hong Kong, if this can be done easily and without a wicked tax backlash at home. It is also a reason to keep savings and investments here.