Wealthy Hong Kong-based Americans who work on the mainland could pay less tax under a law newly signed by US President George W. Bush. But the expatriates also face tougher fines for not disclosing foreign bank accounts and transactions. The new law repeals a 90 per cent limit on the amount of tax credits American expatriates can claim against their US taxes from those paid in their host countries. The US is the only country which requires its citizens abroad to pay taxes in both host and home countries. The maximum tax rate in the mainland is 45 per cent for those who earn more than 100,000 yuan a month. By contrast, Americans pay a maximum of only 35 per cent tax if they earn more than US$311,951 a year. Those working abroad also have a tax exemption of up to US$80,000. 'The new US tax act is a positive development,' said David Sutherland, chairman of the American Chamber of Commerce Tax Committee. 'If a US taxpayer pays enough foreign taxes they will no longer have to pay any US taxes.' But Mr Sutherland, a managing director at Morgan Stanley, warned that many Americans who stand to benefit from the laws may not realise it because of the sheer complexity of the US taxation law system. 'I am a pretty sophisticated tax professional and I know what the rules are supposed to say, but it's still extremely difficult for me to read my tax return. So for the average guy on the street it will be really hard,' Mr Sutherland said. Wealthier individuals stood a higher chance of benefiting from the change because they were more likely to hit the higher tax brackets, he said. The new rules will also extend the carry-forward for unused tax credits from five to 10 years. Those who knowingly fail to disclose foreign bank accounts or financial transactions outside the US will face a stiffer penalty of up to half the value of the account or the transaction, instead of a maximum fine of US$100,000. A fine of US$10,000 will also be introduced for those who unknowingly fail to disclose such foreign transactions or bank accounts. 'Most of the accounting firms that prepare your tax return don't prepare the form for disclosing your bank account,' Mr Sutherland said, adding that many people thus neglected to disclose their foreign bank accounts and thus put themselves at risk of being fined. At the end of last year an estimated 31,130 Americans were living in Hong Kong.