Leaving Hong Kong - Tax and MPF

Does anybody have any advice or suggested references in regards to the the most simplistic and effective way to complete all the legalities that leaving HK entails. We are leaving in November and are planning to withdraw our MPF.


Cheers!

Depending on how long you've been here (I assume it has been a couple of years at least) then you have probebly already paid provisional tax up to March 2007 anyway. You will need to inform the IRD that you are leaving on a certain date and they will do the rest. You might not have any refund by the time you leave but best to discuss that with them direct. And on the MPF front you need to submit an application for withdrawal from the scheme to the administrator. The exact procedure should be set out in your membership booklet. Basically you need to prove that you are leaving HK for good. And you can only ever do this once, so on the off chance that one day you return you will not then be able to withdraw when you subsequently leave again - your benefit will need to stay with the scheme until you genuinely retire in whatever country you are at the time.

Another point to consider is that HK retirement trusts (both the MPF variety and the ORSO or private variety) give you legitimate tax-freedom in the UK, the EU, Canada, Australia and New Zealand, for starters. The HK retirement trust is an excellent estate-planning tool because it permits wide investment powers and also eliminates estate taxes / death duties in all countries including the USA.


In other words, unless you want your MPF cash to spend right now, leave it alone to grow tax-free in HK and tax-free forever in your hands just about anywhere else in the world.


And while you are about it, consider starting your own private tax-free ORSO retirement trust for any other savings you want to put away.

Thanks very much!

Not sure what country you are going to but a HK trust will not (lawfully) give you tax protection if you become an Australian resident. In fact it will be taxed at a punitive level. Money left in a MPF account is taxable on the same basis as other assets - and unfortunately can't be rolled into an Australian super account in any tax effective way - at least you don't pay tax at this end.

sydexpat is incorrect: s.519 Income Tax Assessment Act 1936 (Australia) specifically exempts MPF and ORSO schemes from Australian tax and has done since 1992. B oth MPF and ORSO schemes can be rolled over to domestic schemes but one wonders why one would swap tax-free super for taxable.


Any other type of trust is however fully taxable in Australia as sydexpat says.

Let me understand the issue - it is asserted that a HK MPF/ORSO, whether employer or private, is supposed to offer lifetime tax free status in a bunch of countries - yes? Not simply deferral of taxation, but no taxation - ever.


Okay, please prove it. Details of your expertise to make such an assetion and details of which employers are doing this for their employees (or even types of employers) would be appreciated.


Let me declare my skeptism upfront. Can it really be true that all these sophisticated tax regimes have simply decided not to tax earnings/contributions re a HK pension scheme? Past contributions and earnings - fine we can probably all agree on that (as what is yours is yours), but you are discussing future earnings and distributions when you are a resident of the country? It sounds like the mythical Shangri-la, and could be that all who seek it will perish (or simply be threatened with jail and/or huge penalties and be considered tax evaders - at least by authorities). Presumably there are good fee to pay to a friendly adviser to set it all up for you.


Though I suspend skepticism and declare that if appropriate proof is provided, I will bow and scrap and give due credit and homage to whoever proves it, and seek to implement a similar scheme ASAP! To help with the challenge, as Oz was being discussed let's look at a few things:


First issue: s519 of Oz Tax Act provides an exemption to the current taxation rules in Oz, ie it only stops current taxation it does not say there will never be tax - true/false? If true game over.


Second issue: can a private ORSO fall within these rules as must be employer-sponsored and I think "maintain" (i.e. not merely establish) is a word used somewhere? Yes/No? Are half the schemes out of contention already ?


Final issue: doesn't MPF/ORSO rollover to your own account when you leave employer/HK, so does that mean no longer employer-sponsored/maintained? True/false? Does this possibly take care of the rest of the schemes?

I agree with spaceren. Would love it not to be the case - but if the Australian government doesn't manage to get its hands on part of the earnings/profits of all overseas income sources - (once you become a resident again) - then its only an error - and one they will soon fix. I really hope Brahma is right - I will be immediately transfering as much as I can into my MPF scheme so that it is tax free forever - if only life were so easy - especially as voluntary contributions can be withdrawn at any time


The MPF ORSO rollover problem is that if you leave HK and get it paid out, it loses its status as a super/reirement fund because it gets paid to YOU (not a trustee) as a lump sum. So you don't even get the concessional rollover benefits that you do when bring money in from retirement schemes in other countries.

Sorry, original question to be answered how to deal with regulatory requirements:


Tax - look at www.ird.gov.hk, full details. Do a month before, if possible and coordinate with employer (as you need them to file before you can!).


MPF - talk to your provider, they will have the forms to complete and the proof needed (may need tax clearance from IRD). Likely only paid out after leaving, but as indicated above a one-shot deal, so make sure you are not returning.


You could leave it here for a while to see what happens in your life, just don't expect magical tax free benefits in your new jurisdiction from doing so - in sophisticated tax regimes that is likely considered "non-reporting" or better yet, "tax evasion", and you really take your chances with such behaviour (for most people on this board a tax charge/conviction is likely a big deal - potential loss of employment apart from penalties / jail etc - oh and there are promoter penalties for those selling nasty schemes, so make your you get such advice paid for in writing and make sure your advisor does with you to jail - sweet!). Hope this helps.


Separately, US people know that MPF is one of the worst C&B schemes around, current tax on contributions that are subject to preservation... who cares about death taxes.


If it seems too good to be true, it probably is.

s. 519 of the Australian Tax Act and s.94 of the Canadian Tax Act and Extra Statutory Concession A10 by the UK HMRC all say the same thing: no tax on the HK ORS or on distributions.


That is law not idle chitter-chatter.


The HK ORS also has application for the EU except France at present and also for the USA. But until Congress has finally decided on an overhaul of pension laws best is to wait.

brahma - re the Aust tax position, do you really mean s519? That just defines what is an interest in a FIF. Where is the assessment rule about interests in FIFs?