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Hong Kong Accounts: Foreign Reporting Requirements
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In recent years, the Internal Revenue Service (IRS) has stepped up enforcement of foreign accounts compliance to ensure that US persons with overseas assets, investments, and income properly report to the IRS. As a result, many taxpayers who have previously resided in Hong Kong or still maintain significant unreported assets there are now facing stiff penalties.
US Person Definition
The definition of a US person is broader than just individuals, also including entities. In this article, we will focus on individual US persons with accounts in Hong Kong who may need to file the FBAR (FinCEN Form 114).
FBAR Reporting Basics
For US persons with accounts in Hong Kong, the annual aggregate total of all accounts combined must exceed $10,000 for reporting purposes. The due date is April 15, but an automatic extension until October applies.
Largest Banks in Hong Kong
Some of the largest banks in Hong Kong include:
- Standard Chartered Bank
- Bank of China
- HSBC Hong Kong
- Hang Seng Bank
Expats Still Report FBAR
Even if a US person has relocated to Hong Kong or is considered a permanent resident there, they are still considered a US person and must report their foreign bank accounts on the FBAR. If they qualify for the Streamlined Foreign Offshore Procedures, they may be eligible for a full penalty waiver.
Hong Kong Mutual Funds and FBAR
Mutual funds, ETFs, and SICAVs in Hong Kong are common investment vehicles that may require reporting on the FBAR. Even if income from these accounts is exempt from tax in Hong Kong, it is still taxable in the United States and must be reported.
Insurance Policies and FBAR Reporting
Life insurance policies in countries like Hong Kong and Singapore, which serve as investment wrappers, are reportable on the FBAR. Income accumulating within these policies may also be taxable.
MPF: A Reportable Financial Account
The Mandatory Provident Fund (MPF) is a type of retirement plan similar to a 401(k). As a US person with an MPF account, you must report it on the FBAR and other forms like Form 8938 and possibly Forms 8621 and/or 3520/3520-A.
FBAR Amnesty Programs
The IRS offers various amnesty programs for taxpayers who have failed to report their foreign bank accounts. These programs include:
- Voluntary Disclosure Program
- Streamlined Domestic Offshore Procedures
- Delinquency Procedures
Can I Just Start Filing FBAR This Year Instead?
No, unless this is your first year with an FBAR reporting requirement. Attempting to file only for current years after failing to report in prior years can lead to willful penalties and even criminal investigation by the IRS Special Agents.
Contact Our Firm Today
Our team of experienced FBAR lawyers specializes exclusively in international tax and offshore disclosure. We are here to assist you with your foreign reporting requirements.