U.S. taxes for Americans in Hong Kong: what to file, and how to catch up.
Americans in Hong Kong still file a U.S. return every year. Hong Kong’s low salaries tax means the foreign earned income exclusion usually does most of the work, and there is no U.S.-Hong Kong tax treaty. The traps are MPF accounts and local funds, which the IRS sees differently. Most people who fell behind can catch up under the Streamlined procedures, with no penalty if they qualify.
Sound familiar?
- You moved to Hong Kong for finance or law and stayed.
- Your employer pays into an MPF scheme for you.
- You pay salaries tax and assumed that covered everything.
- Your Hong Kong bank asked for your U.S. tax number.
How does the IRS treat MPF and other Hong Kong accounts?
Every one of these goes on your FBAR. What differs is how the IRS taxes them.
| Account | U.S. treatment | |
|---|---|---|
| MPF | Could be treated as a foreign trust or as an employer pension, and the U.S. rules don’t settle which. Growth may be taxable, and funds inside can be PFICs. | Watch out |
| ORSO schemes | Employer plans whose U.S. treatment depends on the scheme. We check yours. | Check first |
| Local funds | Usually PFICs (Form 8621), with complex reporting and tax rules. | Watch out |
| Bank accounts | Interest is taxable for the U.S., even though Hong Kong doesn’t tax it. The accounts count toward your FBAR total. | Taxable |
| Housing benefits | Employer-provided housing is taxed lightly in Hong Kong, but its full value is earned income for the U.S., though the housing exclusion can cover much of it. | Plan ahead |
| Property | U.S. tax may apply to the gain when you sell, even though Hong Kong has no capital gains tax. The U.S. can exclude up to $250,000 of gain on your main home ($500,000 for couples). | Plan ahead |
Which Hong Kong investments are PFICs?
Unit trusts and mutual funds sold by Hong Kong banks, ETFs listed in Hong Kong, and the constituent funds inside MPF schemes. For U.S. tax they’re passive foreign investment companies, or PFICs.
- Each fund needs its own Form 8621 in most years, and gains can be taxed at the top U.S. rate plus an interest charge, unless an election was made in time.
- No local tax to offset it. Hong Kong doesn’t tax dividends, interest or capital gains for individuals, so the U.S. tax on them is paid in full.
- Not PFICs: shares of individual companies on the Hong Kong exchange, bonds, and bank deposits.
Is there a U.S.–Hong Kong tax treaty?
No. The U.S. and Hong Kong have no income tax treaty and no social security agreement. U.S. law still does most of what matters:
- The foreign tax credit doesn’t need a treaty. Hong Kong salaries tax can be credited against U.S. tax on the same income.
- The foreign earned income exclusion and housing exclusion work the same with or without a treaty, and the IRS housing limit for Hong Kong is one of the highest.
- No treaty means no special rules for MPF or ORSO schemes, which is why their U.S. treatment is unsettled.
- No social security agreement means a self-employed American owes U.S. self-employment tax, and working for a U.S. company usually means U.S. Social Security withholding.
Hong Kong does have a FATCA agreement with the U.S., so Hong Kong banks report accounts held by Americans to the IRS.
Two Hong Kong tax years, one U.S. return
U.S. returns run January to December, and the Hong Kong tax year runs 1 April to 31 March. So each U.S. return covers part of two Hong Kong tax years, and we work out which income and which tax belong to which U.S. year, using your payslips and tax assessments.
| Hong Kong | United States | |
|---|---|---|
| Tax year | 1 April to 31 March | January to December |
| Annual return | Issued in early May, due a month later, with an extra month if you file online | April 15, moved to June 15 automatically when you live abroad, or October 15 with an extension |
| Paying the tax | No withholding on salaries: final tax and provisional tax for the next year are billed together, in two installments | April 15, even if you file later |
| Foreign accounts | No separate report | The FBAR, due October 15, filed online |
Foreign tax credit or exclusion: which wins in Hong Kong?
The foreign earned income exclusion, usually, with the credit picking up what it can. Hong Kong salaries tax never goes above the standard rate of 15%, or 16% on the highest incomes, well below U.S. rates.
- Up to $132,900 for 2026 of salary can be excluded, plus housing costs above a base amount, up to the high IRS limit for Hong Kong.
- Above that, the foreign tax credit covers what Hong Kong tax it can, but high salaries in finance and law often still leave U.S. tax.
- Investment income isn’t covered, and Hong Kong doesn’t tax it, so that’s where U.S. tax usually shows up.
We run your returns both ways before choosing. How we compare the exclusion and the credit.
A worked example: a lawyer in Hong Kong
Rachel moved to Hong Kong in 2018 for a law firm. She earns about $230,000 a year, rents an apartment in Mid-Levels, has an MPF account and holds two Hong Kong unit trusts. She hasn’t filed a U.S. return since moving.
| Item | How it’s handled |
|---|---|
| Salary and rent | The exclusion covers the first $132,900 for 2026 and the housing exclusion a large part of her rent. The credit covers some of the rest, and some U.S. tax remains. |
| Tax years | Her Hong Kong tax is split across the U.S. years using her payslips and assessments. |
| MPF | On the FBAR; how its growth is treated for the U.S. is unsettled, so we explain the options before filing. |
| Unit trusts | PFICs: a Form 8621 for each, in each year filed. |
| Catching up | Three years of returns and six FBARs under the Streamlined procedures, with no penalty if she qualifies. |
Catching up from Hong Kong
Most Americans in Hong Kong who fell behind without meaning to can catch up under the Streamlined Foreign Offshore Procedures: three years of returns, six years of FBARs and, if you qualify, no penalties. If only FBARs are missing, or you’ve moved back to the U.S., another route may fit better. See every IRS catch-up option for expats, compared.
Common questions
Do I pay U.S. Social Security tax in Hong Kong?
Usually not if you work for a local employer. There’s no U.S.-Hong Kong social security agreement, though, so self-employment tax can still apply if you work for yourself, and FICA if you work for a U.S. company.
Is the foreign earned income exclusion enough?
Often, for wages. For 2026 you can exclude up to $132,900, plus some housing costs. Investment income isn’t covered, and Hong Kong tax rarely offsets it, so that’s where U.S. tax usually shows up.
What happens to my MPF when I leave Hong Kong?
You can often withdraw it when you leave Hong Kong permanently. A withdrawal could be taxable for the U.S. even though Hong Kong doesn’t tax it, so plan the timing with us.
How do you handle the April tax year?
U.S. returns use the calendar year, so we split your Hong Kong income and tax between the two U.S. years using your payslips and assessments. It’s routine for us.
Can I credit Hong Kong tax without a treaty?
Yes. The foreign tax credit comes from U.S. law, so Hong Kong salaries tax can be credited against U.S. tax on the same income.
Is my bonus treated differently?
No. Bonuses are earned income for the U.S., covered by the exclusion and the credit like your salary, in the year you receive them.
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