The IRS rule is that income that is effectively connected with the U.S. is taxable to the U.S. Without knowing the specifics of your arrangement, I would say if you lived and worked in Hong Kong and paid taxes to Hong Kong, your income is probably not effectively connected to the U.S.
It would be the same as a U.S. citizen working in the U.S. for a subsidy for a Hong Kong company. That person would not owe Hong Kong tax.
The following categories of income are usually considered to be connected with a trade or business in the United States.
- You are considered to be engaged in a trade or business in the United States if you are temporarily present in the United States as a nonimmigrant on an "F," "J," "M," or "Q" visa.
- If you are a member of a partnership that at any time during the tax year is engaged in a trade or business in the United States, you are considered to be engaged in a trade or business in the United States.
- You usually are engaged in a U.S. trade or business when you perform personal services in the United States.
- If you own and operate a business in the United States selling services, products, or merchandise, you are, with certain exceptions, engaged in a trade or business in the United States. For example, profit from the sale in the United States of inventory property purchased either in this country or in a foreign country is effectively connected trade or business income.
- Gains and losses from the sale or exchange of U.S. real property interests (whether or not they are capital assets) are taxed as if you are engaged in a trade or business in the United States. You must treat the gain or loss as effectively connected with that trade or business.
- Income from the rental of real property may be treated as ECI if the taxpayer elects to do so.
Effectively Connected Income (ECI)
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