US Estate Tax for Hong Kong Investors: Work Out the Real Bill
Enter what you hold and this runs the IRS bracket schedule over it, so you can see where a Hong Kong investor lands on the US estate tax table instead of the flat 40 percent that gets repeated everywhere. It prices the schedule, not your whole estate: debts, funeral and administration costs and charitable bequests all belong on the return and none of them are modelled here.
Estimate the US estate tax on your own holding
Adjusted taxable gifts plus any gift tax specific exemption. These count toward the filing threshold and stack under the estate before the rate schedule runs.
Whatever was used there comes off the 13,000 dollar credit here, dollar for dollar.
$41,800
US-situated assets of $200,000 produce $41,800 of US estate tax after the $13,000 unified credit. That is 20.9% of the holding, against a top marginal rate of 40 percent.
- Taxable estate
- $200,000
- Tax before credit
- $54,800
- Unified credit
- $13,000
- Effective rate
- 20.9%
Form 706-NA is due within 9 months of the date of death.
As held now
$41,800
After the shift
$0
Difference
$41,800
This prices the estate tax difference only. Selling to switch can trigger its own costs, and non-US funds carry wider spreads and different platform availability.
Next: price the 30 percent dividend withholding on the same holding
The bracket schedule behind the number
US estate tax on a nonresident runs on Table A of the Form 706 instructions, the same unified rate schedule US citizens use. It has twelve bands starting at 18 percent. Only the part of a taxable estate above one million dollars meets 40 percent. The band your own estate lands in is highlighted below as you change the inputs above.
| Taxable amount over | Not over | Tax on the lower figure | Rate on the excess |
|---|---|---|---|
| 0 | 10,000 | 0 | 18% |
| 10,000 | 20,000 | 1,800 | 20% |
| 20,000 | 40,000 | 3,800 | 22% |
| 40,000 | 60,000 | 8,200 | 24% |
| 60,000 | 80,000 | 13,000 | 26% |
| 80,000 | 100,000 | 18,200 | 28% |
| 100,000 | 150,000 | 23,800 | 30% |
| 150,000 | 250,000 | 38,800 | 32% |
| 250,000 | 500,000 | 70,800 | 34% |
| 500,000 | 750,000 | 155,800 | 37% |
| 750,000 | 1,000,000 | 248,300 | 39% |
| 1,000,000 | no ceiling | 345,800 | 40% |
Notice the row at 60,000. The tax on exactly that amount is 13,000 dollars, which is the maximum unified credit a nonresident gets. The credit and the threshold are the same number viewed from two sides.
Four portfolios, run through the same maths
What the IRS counts as US property
The test is where the issuer is organised, not where you or your broker are. The IRS puts it plainly: stock of corporations organised in or under US law counts, even if the nonresident held the certificates abroad or registered them in the name of a nominee. Opening the account in Hong Kong does not move the asset out of reach.
Inside the net
- Shares of US incorporated companies
- US domiciled ETFs holding any market
- Shares held abroad or through a nominee
Outside it
- Deposits and debt described in section 871(g) to (i)
- Deposits with a foreign branch of a US bank
- Life insurance on the life of a nonresident
Why Hong Kong gets no treaty relief
Estate tax treaties can narrow what counts as US-situated and can lift the credit. The IRS publishes the list of jurisdictions that hold one. Hong Kong is absent from it, and so is mainland China. Australia, Japan and the United Kingdom are on it, which is why guidance written for readers in those places quietly assumes relief that a Hong Kong estate does not get.
The spouse assumption that does not travel
Most US estate planning articles lean on the unlimited marital deduction, where everything passes to a spouse untaxed. The Form 706-NA instructions attach a condition: unless a treaty allows otherwise, the deduction is available only where the surviving spouse is a US citizen, or where the property passes into a qualified domestic trust under section 2056A with the election made on Schedule M. For a Hong Kong couple with no US citizenship and no treaty, neither door is open by default, and the calculator above refuses the deduction until you say which one applies.
What this calculator cannot answer
- Not ideal for: anyone who needs a filing position. This runs the published schedule on numbers you type. Valuation on the date of death, jointly held property, prior taxable gifts and state level rules all change the return, and none of them are modelled here.
- Not ideal for: pricing the full cost of switching to non-US funds. The comparison above moves estate tax only, and says nothing about capital gains on the sale, spreads, or whether your platform carries the fund.
- Cash held inside a brokerage account is treated here as a deposit only if you enter it as one. The IRS carve-out is written around deposits and debt obligations, and how your own cash is held is a question for your broker.
Where every number here comes from
- IRS on nonresidents with US assets is the source for the situs rules and the deposits carve-out.
- Instructions for Form 706-NA gives the 60,000 dollar threshold, the 13,000 dollar maximum unified credit, the nine month deadline and the marital deduction condition.
- Instructions for Form 706, Table A is the unified rate schedule reproduced above, band for band.
- IRS estate and gift tax treaty table is the list checked for Hong Kong, which does not appear on it.
Questions Hong Kong investors ask about this
Do Hong Kong investors pay US estate tax on US shares?
Yes, once the US-situated part of the estate passes 60,000 US dollars. The IRS treats stock of a company organised under US law as US-situated even when the shares sit in a Hong Kong brokerage account and even when they are registered to a nominee. Where the broker is does not move the asset.
Is the US estate tax rate for a nonresident really 40 percent?
Forty percent is the top marginal rate, and it only starts on the part of a taxable estate above one million US dollars. The schedule below it runs from 18 percent upward in twelve bands. A 200,000 dollar US-situated estate with no deductions works out at 41,800 dollars after the credit, which is under 21 percent of the holding, not 40.
Is there a US estate tax treaty with Hong Kong?
No. The IRS publishes the list of jurisdictions holding a US estate or gift tax treaty and there are 15 of them. Hong Kong is not one, and neither is mainland China. Australia, Japan and the United Kingdom are, which is why advice written for those readers does not transfer.
Does an Irish domiciled ETF avoid this?
The situs test looks at where the issuing company is organised, not at what the fund holds. A fund organised in Ireland is not stock of a company organised under US law, so it falls outside the US-situated list even while it tracks the S&P 500. That is why the route is discussed at all. It brings its own trade-offs in spread, tracking and platform availability, which this calculator does not price.
Are US bank deposits and Treasuries counted?
The IRS lists certain deposits and debt obligations described in section 871(g) to (i), and deposits with a foreign branch of a US commercial banking business, as property situated outside the United States. Cash sitting inside a brokerage account is a different question from a bank deposit, so check how your own account is held rather than assuming.
Can I leave everything to my spouse and pay nothing?
Only if that spouse is a US citizen, or the property passes into a qualified domestic trust under section 2056A with the election made on Schedule M. For a Hong Kong couple where neither holds US citizenship, the unlimited marital deduction people quote from US articles is not available, and the calculator above blocks it for that reason.
When is Form 706-NA due?
The executor files Form 706-NA within nine months of the date of death unless an extension is granted, and the tax is payable on the same nine month clock. The return is required once US-situated assets pass 60,000 dollars, which is a lower bar than the point where tax becomes payable, because the first 13,000 dollars of tax is covered by the unified credit.
Does the broker withhold this automatically?
This is not the 30 percent dividend withholding you already see on your statement. Estate tax is assessed on the estate through a return the executor files, and the IRS can collect unpaid estate tax from a person who received a distribution of the property. In practice a broker holding US-situated assets will usually want a transfer certificate before releasing them, which is why the paperwork surfaces at the worst possible moment.
Related tools and reading
US dividend withholding calculator
The 30 percent that comes off every dividend while you are still alive.
US dividend tax for Hong Kong residents
W-8BEN, the no treaty position, and what lands in your account.
VWRA against VOO and VT on tax
The Irish domiciled route compared on withholding, not just on fees.
Brokers for US stocks from Hong Kong
Where the account sits, and what each platform will and will not carry.
Built by Jim Liu. I filed my own W-8BEN with a Hong Kong broker and went looking for what happens to those shares afterwards. Every threshold and rate on this page is taken from an IRS page linked above, because the version circulating in Chinese language forums is a flat 40 percent that the schedule does not support. This is not tax advice, and an estate of any size deserves a professional who can see the whole picture.