Green card holders face heavy tax trap

SWEEPING changes to United States tax laws could leave some Hong Kong residents liable for huge tax bills, a leading firm of accountants warns.

Those who renounce either their US citizenship or 'green card' could be hit with a capital gains tax of about 28 per cent on their world-wide assets.

A top-level congressional committee is considering the proposals, which, if passed, could be backdated to February 6.

Anne Shih, a tax partner at Deloitte Touche Tohmatsu, said: 'Hong Kong residents that do not have US citizenship should not take it up if they feel it could be dropped at a later date.

'If they already have a green card then they need to be very careful as to whether they will relinquish it.' Bruce Reynolds, another partner with the company, gives the legislation a 50-50 chance of being passed.

Mr Reynolds said revenue-hungry legislators were looking at ways of generating tax flows.

Hitting those without a vote could prove irresistible to some of them.

Tax experts claim some Hong Kong residents have dropped their green-card status to avoid tax liability.

Under the new proposals, the liability will apply at the time of disposal of an individual's assets in excess of US$600,000.

At the moment, capital gains tax is imposed at a rate of 28 per cent.

Mr Reynolds said assets liable for the tax would range from a Hong Kong home to a share portfolio.

'There is still the issue as to how the assets would be valued,' he said.

'The US tax system is based on the assumption that the individual will report what he or she owns.' Officials would attribute the possessions at 'fair market value' before deciding the level on which to impose the tax.