Financial planning advice for expats in Hong Kong
Written by Philip Howell-Williams on November 16, 2017.
Earlier this month I was honoured to be invited to talk expat finances in Hong Kong with Peter Lewis on his Saturday morning show on RTHK, Money Talk. Peter pointed out that Hong Kong is an attractive expat destination – it ranked 44 in the 2016 InterNation survey for overall attractiveness – but wanted to know the financial considerations that need to be taken into account by those seduced to the territory. These were the main things I had to say:
1. Familiarise yourself with the tax system
Hong Kong’s financial system may differ significantly from that in your country of origin. There is no PAYE here and many new expats get a nasty surprise when they receive their first tax bill, even if taxes here are relatively low. It’s important to plan ahead and put money aside to cover your bill.
2. Plan for the future
While Hong Kong’s Mandatory Provident Fund (MPF) system is a compulsory saving scheme to contribute towards your pension, it is not going to be enough for you to retire on comfortably. You need to look at additional investment opportunities to save for your future. You will more than likely have a pension back home in the UK, a superannuation scheme if you are from Australia or a 401k if you are from the States. It’s important to make sure that you don’t neglect this and allow it to dwindle away but manage it as part of your overall financial plan.
3. Education planning is key
The days of old school education packages for children of expats working in Hong Kong are long gone. Education in Hong Kong is extremely expensive so those thinking of moving here need to look at the costs in advance to ensure that they can afford it. When it comes to a university education, although expats may be domiciled in a certain country, the fact that they live in Hong Kong could mean that their children have to pay international university fees which are two or three times those of local students. Often expats are looking at six figures sums for just the fees with accommodation, general living expenses and books on top. It’s crucial to plan ahead.
4. Don’t squander this unique opportunity
Living in Hong Kong frequently affords expats a unique opportunity to benefit from a higher income and lower taxes which means that they can enjoy a fantastic lifestyle and still save significant sums. It’s a crying shame that so many fail to capitalise on this and-repatriate with very little to show for it. Another frequent mistake is to be seduced by ill-advised investments such as cheap property purchases in neighbouring countries in Asia without taking into consideration the long term legal and tax ramifications. Always seek advice before making major financial commitments.
It is true that FATCA (Foreign Account Tax Compliance Act) has complicated the financial lives of some Americans living abroad but it is not designed to stop people saving for their future, merely to make sure that they are compliant with US tax regulations.
It is undeniable that Hong Kong is expensive – reportedly the second most expensive country in the world. It is frighteningly easy to power through HK$1000 (US$100) a day just on general living expenses. Those thinking of relocating here – especially families - really need to do their homework and keep their overheads low. Many companies offer free financial planning services to help their employees with budget planning but if yours doesn’t, there is help out there from companies such as Infinity.
If you’d like to hear my dulcet tones and listen to the podcast in full, you can access it here. And if you are an expat in Hong Kong – old or new – and need help getting your finances in order, I’d love to hear from you.