Hong Kong is a low-tax jurisdiction with no comprehensive US income tax treaty or social security totalization agreement. For Americans in Hong Kong, this means double-tax relief relies on US domestic provisions like the Foreign Earned Income Exclusion and the Foreign Tax Credit. Self-employed individuals face a significant compliance point as they remain fully liable for US self-employment taxes.
US filing basics every American abroad must know
US citizens and green-card holders are taxed on worldwide income wherever they live, and usually must file Form 1040 once gross income exceeds the IRS threshold ($15,750 for single filers, $31,500 for married filing jointly, and $23,625 for head of household for 2025), even when no tax is ultimately due. The tools that reduce double taxation are the Foreign Earned Income Exclusion (FEIE, up to $130,000 for 2025 under IRC §911) and the Foreign Tax Credit. Neither is automatic. The FEIE requires a tax home in a foreign country plus either the bona fide residence test or 330 full days abroad in a 12-month period, and it reaches earned income only. The Foreign Tax Credit is figured separately for each income category under IRC §904 and is capped at the US tax on the foreign income in that category, so it reduces double taxation without guaranteeing that none remains.
Two reporting rules catch most filers in Hong Kong: the FBAR (FinCEN Form 114), required when foreign financial accounts exceed $10,000 in aggregate at any point in the year, and Form 8938 (FATCA) for specified foreign assets above the applicable threshold. Both can carry penalties even when no tax is owed. If you are behind, the Streamlined Filing Compliance Procedures are the usual path back for non-willful taxpayers. They run on two tracks: the foreign track carries no offshore penalty but requires meeting the program's non-residency test, and the domestic track carries a 5% offshore penalty but works through amended returns, so it does not fit someone who never filed at all. Tax and interest on the catch-up years are owed whichever route applies.
US tax treaty with Hong Kong
There is no comprehensive income tax treaty between the United States and Hong Kong. Consequently, there are no treaty-based reductions in withholding tax rates or special rules for pensions or capital gains. Double taxation is avoided primarily through the US Foreign Tax Credit (FTC) and the Foreign Earned Income Exclusion (FEIE). A Tax Information Exchange Agreement (TIEA) is in place, but this agreement only facilitates the sharing of tax information and does not provide any tax relief to individuals.
Mandatory Provident Fund (MPF) and US Tax
Hong Kong's Mandatory Provident Fund (MPF) is not considered a 'qualified' retirement plan by the IRS, leading to unfavorable US tax treatment. This has several key consequences:
- Contributions: Employer contributions to your MPF are taxable US income in the year they vest, which for the mandatory portion is the year they are made. Employee contributions are made with post-tax dollars and are not deductible on a US return.
- Growth: Unlike a 401(k), no US statute or treaty defers tax on investment growth inside an MPF, so depending on how the account is characterized the interest, dividends, and capital gains it earns can be taxable to you as they accrue rather than when you take a distribution. No IRS ruling addresses the MPF by name, so the characterization has to be worked out on the facts of the plan.
- Reporting: An MPF is a foreign financial account. It must be reported on FinCEN Form 114 (FBAR) if your aggregate foreign account balances exceed $10,000. It also counts toward the thresholds for Form 8938 (Statement of Specified Foreign Financial Assets). Depending on its structure, it could also be viewed as a foreign trust, which can trigger reporting on Form 3520, though a plan that meets the conditions in Rev. Proc. 2020-17 is exempt from that reporting.
(Quick answer on MPF taxation.)
Investments, property, and capital gains in Hong Kong
Investing in Hong Kong requires careful navigation of US tax rules. Many locally available investment products, including mutual funds and ETFs, are likely to be classified as Passive Foreign Investment Companies (PFICs). Owning PFICs requires filing Form 8621 for each fund, and without specific, timely elections, the income is taxed under a punitive default regime. Furthermore, while Hong Kong does not tax capital gains, the US does. The sale of property or other capital assets in Hong Kong at a gain will generate a taxable capital gain on your US tax return. Finally, if you own 10% or more of a Hong Kong corporation, you may need to file Form 5471. The company is a Controlled Foreign Corporation (CFC) when US shareholders who each own 10% or more together hold more than 50% of it by vote or by value, counting only those 10% US shareholders. Where it is a CFC, you could be taxed currently on its earnings under the GILTI or Subpart F rules, even if you receive no dividends.
Self-employment and companies in Hong Kong
A critical point for self-employed US citizens in Hong Kong is that there is no social security totalization agreement between the United States and Hong Kong. This means you cannot get a Certificate of Coverage to avoid US social security and Medicare taxes. If you have net self-employment earnings of $400 or more, you owe the full US self-employment tax: 15.3% on 92.35% of net earnings, with the 12.4% Social Security portion stopping at the annual wage base ($176,100 for 2025) and the 2.9% Medicare portion uncapped, plus a further 0.9% Additional Medicare Tax on combined Medicare-taxed wages and self-employment income above $200,000 for a single, head-of-household or qualifying-surviving-spouse filer, $250,000 for a joint return, and $125,000 for married filing separately. This tax is calculated on your net earnings before the Foreign Earned Income Exclusion. Using the FEIE on Form 2555 to exclude your income from US income tax does not reduce your liability for US self-employment tax.
Worked examples
Salaried employee on local payroll (2025)
A US citizen works as a marketing manager in Hong Kong with a salary of USD 160,000. Her employer makes the mandatory MPF contribution, which is 5% of relevant income but capped at HKD 1,500 per month, or HKD 18,000 for the year (roughly USD 2,300). For US tax purposes that employer contribution is compensation for services she performed in Hong Kong, so her foreign earned income is about USD 162,300. The Foreign Earned Income Exclusion (FEIE) is $130,000 for 2025 and requires a tax home in Hong Kong plus either the bona fide residence test or the 330-day physical presence test. Meeting those, she excludes $130,000 and roughly USD 32,300 stays subject to US income tax. She must also report her MPF account on her FBAR and potentially Form 8938, and she may have to report the annual investment growth within the MPF as current income.
Self-employed consultant (2025)
A US citizen works as a freelance graphic designer in Hong Kong, earning USD 110,000 in net self-employment income. If her tax home is in Hong Kong and she meets either the bona fide residence test or the 330-day physical presence test, the FEIE excludes the full $110,000 from her US income tax. However, because there is no totalization agreement, she owes US self-employment tax on her earnings. That tax runs on 92.35% of net earnings ($110,000 * 0.9235 * 0.153), around $15,540, with the full 15.3% applying because the $101,585 base sits below the $176,100 Social Security wage base for 2025. She cannot use contributions to any Hong Kong system to offset this US tax.
Investor selling property (2025)
A retiree living in Hong Kong sells a residential property for USD 1.5 million that she originally purchased for USD 900,000. Hong Kong does not tax the gain. For US tax purposes, she has a USD 600,000 capital gain. If she owned and used the property as her main home for at least two of the five years before the sale, she may exclude up to $250,000 of the gain under Section 121, or $500,000 if she is married filing jointly and both spouses meet the use test. Any remaining gain is fully reportable and taxable in the United States. Additionally, her investment portfolio contains several Hong Kong-domiciled mutual funds. These are PFICs, requiring her to file multiple Form 8621s and pay US tax on the funds' earnings, potentially at high penalty rates.
Common mistakes for Americans in Hong Kong
- Assuming a US-Hong Kong tax treaty exists to lower taxes.
- Believing the Foreign Earned Income Exclusion (FEIE) eliminates the need to pay US self-employment tax.
- Attempting to obtain a Certificate of Coverage to avoid US self-employment tax, which is not possible for Hong Kong.
- Forgetting to include employer contributions to an MPF as taxable income on their US return.
- Assuming growth inside an MPF is tax-deferred in the US the way a 401(k) is, without working out how the account is characterized.
- Not reporting Hong Kong-based mutual funds or ETFs as PFICs on Form 8621.
- Thinking that a property sale is tax-free for US purposes just because it is tax-free in Hong Kong.
- Omitting the MPF account from the annual FBAR (FinCEN Form 114) filing.
Hong Kong tax FAQ
Is there a US-Hong Kong tax treaty?
No, there is no comprehensive income tax treaty between the US and Hong Kong. This means there are no treaty benefits like reduced withholding rates. Tax relief is managed through US domestic law, primarily the Foreign Earned Income Exclusion and the Foreign Tax Credit.
Do I have to pay US Social Security tax if I'm self-employed in Hong Kong?
Yes. There is no US-Hong Kong totalization agreement, so a self-employed US person with net earnings of $400 or more owes US self-employment tax: 15.3% on 92.35% of net earnings, with the 12.4% Social Security portion stopping at the annual wage base ($176,100 for 2025) and the 2.9% Medicare portion uncapped. The Foreign Earned Income Exclusion does not reduce it, and the Foreign Tax Credit cannot offset it.
How is my Hong Kong Mandatory Provident Fund (MPF) taxed in the US?
The IRS does not treat the MPF as a qualified retirement plan. Employer contributions are taxable income to you in the year they vest, which for the mandatory portion is the year they are made. No US statute or treaty defers tax on the fund's internal investment growth, so depending on how the account is characterized that growth can be taxable to you as it accrues rather than when it is distributed.
Do I need to report my MPF on an FBAR?
Yes. An MPF is a foreign financial account. Its value must be included with your other foreign accounts, and if the total value exceeds $10,000 at any point during the year, you must file a FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR).
I sold my Hong Kong apartment. Is the profit taxable in the US?
Yes. Even though Hong Kong does not have a capital gains tax, the US taxes the worldwide income of its citizens. The gain from the sale of your Hong Kong property is reportable and subject to US capital gains tax. The Section 121 exclusion does apply to a home located abroad: up to $250,000 of gain, or $500,000 for a married couple filing jointly where both meet the use test, provided you owned and used the property as your main home for at least two of the five years before the sale.
Are my Hong Kong mutual funds a problem for my US taxes?
They can be. Most non-US funds, including those in Hong Kong, are considered Passive Foreign Investment Companies (PFICs). Owning PFICs triggers complex reporting on Form 8621 and can lead to very high tax rates unless specific and timely elections are made.
Can I use the Foreign Earned Income Exclusion (FEIE) in Hong Kong?
Yes, if you qualify. The FEIE takes two things: a tax home in a foreign country, plus either the bona fide residence test or the 330-day physical presence test. Meeting both parts lets you claim it on Form 2555 to exclude up to $130,000 (for tax year 2025) of your foreign earned income from US income tax.
My employer contributes to my MPF. Is that money tax-free?
No. For US tax purposes, contributions made by your employer to your MPF are considered part of your current compensation. You must include the value of those contributions as taxable income on your US tax return for the year they are made.
Sources and last reviewed
- IRS, Foreign Earned Income Exclusion (verified 2026-06-07)
- IRS, Instructions for Form 5471 (verified 2026-06-07)
- SSA, Totalization Agreements Overview (verified 2026-06-07)
- Hong Kong Inland Revenue Department (verified 2026-06-07)
Reviewed by Ilya Fayerman, Esq. (NY Bar) on
Asia depth guide
For filing context specific to Hong Kong in APAC, see the dedicated guide on US Tax Asia, Hong Kong (separate site, complementary content).
Common services needed by expats in Hong Kong
Most Americans abroad in Hong Kong need help with at least one of the following core compliance areas, which frequently interact:
- US expat tax returns, Form 1040 with FEIE, FTC, treaty positions, and any required state returns.
- FBAR reporting, FinCEN Form 114 for foreign financial accounts exceeding $10,000 aggregate at any time during the year.
- Form 8938 (FATCA), IRS disclosure of specified foreign financial assets when thresholds are met.
- Streamlined catch-up filing, For eligible non-willful taxpayers with prior unfiled years.
Related country guides
- US expat tax in South Korea
- US expat tax in Japan
- US expat tax in Singapore
- US expat tax in Thailand
- US expat tax in Taiwan
- US expat tax in Philippines