After a long and successful career in Hong Kong, you might find yourself dreaming of a move overseas. Maybe you are ready to retire? Or are you looking for a new job back in the UK or elsewhere? You might even be considering moving your family overseas while you stay on in Hong Kong.

Whatever the reason, you’ll want to think carefully about the tax treatment of your accumulated wealth.

Keep reading for eight simple tax tips to consider if you or your family are ready to leave Hong Kong. Plus, how BMP Wealth can help you.

1. Prepare in advance

The key to any big move is preparation, and this is especially true if you are looking to leave Hong Kong.

Generally speaking, the capital you have accumulated during your Hong Kong-based career will have been amassed in a low-tax area. That wealth, though, could be subject to higher rates of tax where you are now planning to go.

Taking the time to prepare your finances prior to the move could make all the difference. At BMP Wealth, we can help you put the necessary financial structures in place to hold your assets tax-efficiently, be that through insurance bonds, companies, or trusts.

Setting up these structures ensures you can draw down your hard-earned income in the most tax-efficient way possible once you or your family are settled in a new country.

2. Crystallise existing capital gains before you move

It is important that you crystalise the gains you have accumulated in Hong Kong, prior to your move. Otherwise, all of your gains could be subject to tax in the area you are moving to. This is especially important as it’s likely to be at a higher rate than you would pay in Hong Kong, where it is 0%.

Say, for example, you have gains made in a stocks and shares investment and you move to the UK, the Capital Gains Tax (CGT) scenario could look like this:

Ann and Peter are friends living in HK, who both hold investment portfolios.

In 2016, they each buy shares in Tencent for HK$500,000.

They both move to the UK in 2022, at which time each shareholding is worth HK$1,670,000.

They want to sell these HK listed shares for a deposit on a property while in the UK (assume the price has dropped to HK$1,600,000):

Ann saves £22,000 (HK$226,000) in CGT by using a little financial planning prior to her departure.

3. Consider your tax-free pension wealth carefully

The compulsory pensions that you have accumulated in Hong Kong are known as Mandatory Provident Funds (MPFs). When you permanently leave Hong Kong, these can be usually taken as tax-free cash lump sums. While this might be enormously tempting, it might not be the best thing to do.

Hong Kong has Double Tax Treaties with many other countries. These allow the tax due on your pensions to be paid at source, in Hong Kong, rather than in the country you are moving to.

Generally, because Hong Kong tax on income derived from your MPF is 0%, you can draw down pension income free of tax, even if you reside in the likes of the UK for your retirement. This is extremely valuable for your retirement planning strategies!

Plan ahead and speak to us about the best way to access your pension fund overseas.

4. Sort your bank accounts out before you leave

Another key area that will require preparation is your bank accounts. Be sure to get on top of this in the tax year before you depart.

Ideally, you need two accounts, one of which should be a “clean capital” account. “Clean Capital” accounts hold money that can be remitted to the UK without tax consequences – comprising of the Hong Kong income and gains that arose before you became a UK resident.

Crucially, the account will not pay interest, which should ensure you don’t overpay tax, wherever you move to.

This is a very complex area and one that will need expert advice, so be sure to get in touch.

5. If you intend to buy a property, plan the purchase in advance

If you are leaving Hong Kong and want to set up permanent roots elsewhere, you will likely be buying a new property.

This process can be more difficult for expats, as there are generally more hoops to jump through. You should plan your mortgage and your property purchase before you leave Hong Kong.

Think about the type of property you want to buy, where your deposit will come from, and the additional finance you’ll need. Then speak to us.

If you’re considering a move back to the UK, Rob Gill and his team at Altura Mortgage Finance can help.

As one of just four companies that comprise The Arisaig Circle (BMP Wealth is another), you can be sure that Altura Mortgage Finance is driven by the same goals – to deliver high-quality financial solutions wherever you are in the world.

6. You might consider moving your family, but remaining in Hong Kong

It might be financially beneficial to move your family back to their home country but remain in Hong Kong yourself. This will likely be emotionally challenging, but you might also be surprised at how common it is.

Remaining in Hong Kong, where you can take advantage of the higher income and lower tax environment, is a great way of generating more wealth tax-efficiently. This can greatly accelerate achieving your family’s financial plans compared to moving yourself and paying higher rates of taxes.

Again, planning will be key. You’ll need to be sure of the tax rules in the country your family is moving to and know for how long you can visit while still retaining your Hong Kong tax residency.

Overstaying the maximum number of days could see you become an accidental tax resident there, negating the benefits of the move.

7. Be sure of the tax rules in the jurisdiction you are moving to

If you’re moving money to the UK or other areas for your family – possibly to pay school fees or living expenses – you’ll need to be sure that your transferred money can’t be seen as income in that country. This is because transfers seen as income are highly likely to become taxable.

Make sure you take advice before you leave and before you transfer funds. This is an incredibly complicated area of financial planning, with many quirks and complex rules specific to different jurisdictions.

Speaking to us and planning ahead is essential for ensuring that you don’t get caught out.

8. Account for multi-jurisdictional estate planning

As an expat living in Hong Kong, there’s a high chance you hold assets in multiple jurisdictions.

You may have money and property in HK, as well as property, pensions, and bank accounts in other countries where you still have ties or have previously lived and worked.

If so, you need to ensure that you take everything into account with multi-jurisdictional estate planning. This means that you need to organise your affairs and make sure that you plan for each jurisdiction where you have ties or assets.

This includes taking time to consider if you should write a will in each applicable country.

Read more: 10 practical steps to take now to make sure your heirs inherit your assets without delay

Using a law firm that is experienced in dealing with multi-jurisdictions is essential, which usually means reviewing your estate planning before leaving Hong Kong.

Get in touch

If you are planning a move for yourself or your family, whether back to the UK or any other global region, you’ll want to plan carefully and receive professional financial advice first, so please get in touch. Email info@bmpwealth.com or call +852 3975 2878.