Cathay to withhold tax from US pilots (SCMP)
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Cathay to withhold tax from US pilots (SCMP)
New article in the SCMP today:
Cathay to withhold US pilots' wages for taxes | South China Morning Post
Cathay to withhold US pilots' wages for taxes
Airline says new laws are forcing it to hand over 30 per cent of salaries to American authorities
PUBLISHED : Monday, 03 March, 2014, 2:59am
UPDATED : Monday, 03 March, 2014, 2:59am
Phila Siu
[email protected]
Cathay will start withholding tax from the second quarter of the year.
Cathay Pacific Airways is to start withholding about 30 per cent of its American pilots' salary every month and pass the money to the US tax authorities together with the pilots' personal information this year.
While the airline told the South China Morning Post the move was designed to comply with US tax regulations, its decision has been challenged by legal and tax experts in Hong Kong.
They said companies in Hong Kong had no obligation to fulfil demands made by a foreign government because of the two different jurisdictions.
Lawyer Albert Luk Wai-hung said that if the airline observed the US regulations, the affected pilots could sue the airline for underpaying them because part of their salaries would not find its way into their pockets. That could violate the spirit of their contracts.
"The company also cannot pass their employees' personal information to any third parties without their consent," Luk said, pointing to the Personal Data (Privacy) Ordinance.
At the centre of the controversy are two US tax regulations - an income tax withholding requirement in the Internal Revenue Code and the Foreign Account Tax Compliance Act.
Patrick Yip, a national financial services tax leader at Deloitte Touche Tohmatsu, said the tax withholding law required overseas companies which hired US citizens to withhold an amount of tax and pass it to the US Internal Revenue Service. It applies to US citizens who make more than US$97,600 a year - about HK$63,000 a month.
"But practically, Hong Kong and the US are two jurisdictions so I have never seen any companies here which comply with this law," Yip said, adding there would be no penalty even in the case of non-compliance.
"Even the US companies in Hong Kong which have US employees don't do it … no wonder the pilots have such big reactions because no one has ever heard about it."
Cathay will start withholding tax from the second quarter of the year, and pilots said it would affect 300 to 500 of them - up to 18 per cent of cockpit crew.
The pilots said they already had to pay Hong Kong and US taxes, but before Cathay changed its policy they could file US taxes themselves once a year.
CPA Australia's divisional president for Greater China, Ronald Yam, and the chair professor of accounting at the University of Hong Kong, Amy Lau Hing-ling, said they had not heard of a local company withholding US employees' taxes.
As for Fatca, it was passed into law in 2010 but will only take effect in July this year.
The anti-tax evasion law requires foreign financial institutions such as banks to declare to US tax authorities the foreign holdings of anyone liable under US tax.
"The US Internal Revenue Service is actively seeking airlines flying into the US to ensure they are fully compliant with all US income tax requirements," Cathay said. "As an international airline flying into the US, we are working with the IRS on this compliance."
Cathay added that no disclosure of information would be made to the IRS without "notifying" the pilots.
Yip, an expert on Fatca, said that if Cathay did not comply, the US tax authorities would withhold 30 per cent of its US-source income.
He said it was "strange" that the tax authorities had demanded airlines declare pilots' financial details because airlines were not financial institutions.
Two American pilots employed by Cathay said the plans would create cash-flow problems for them. They also said that filing tax was a complex matter and they were concerned they might pay more than they should.
This article appeared in the South China Morning Post print edition as Cathay to withhold US pilots' wages for taxes
Cathay to withhold US pilots' wages for taxes | South China Morning Post
Cathay to withhold US pilots' wages for taxes
Airline says new laws are forcing it to hand over 30 per cent of salaries to American authorities
PUBLISHED : Monday, 03 March, 2014, 2:59am
UPDATED : Monday, 03 March, 2014, 2:59am
Phila Siu
[email protected]
Cathay will start withholding tax from the second quarter of the year.
Cathay Pacific Airways is to start withholding about 30 per cent of its American pilots' salary every month and pass the money to the US tax authorities together with the pilots' personal information this year.
While the airline told the South China Morning Post the move was designed to comply with US tax regulations, its decision has been challenged by legal and tax experts in Hong Kong.
They said companies in Hong Kong had no obligation to fulfil demands made by a foreign government because of the two different jurisdictions.
Lawyer Albert Luk Wai-hung said that if the airline observed the US regulations, the affected pilots could sue the airline for underpaying them because part of their salaries would not find its way into their pockets. That could violate the spirit of their contracts.
"The company also cannot pass their employees' personal information to any third parties without their consent," Luk said, pointing to the Personal Data (Privacy) Ordinance.
At the centre of the controversy are two US tax regulations - an income tax withholding requirement in the Internal Revenue Code and the Foreign Account Tax Compliance Act.
Patrick Yip, a national financial services tax leader at Deloitte Touche Tohmatsu, said the tax withholding law required overseas companies which hired US citizens to withhold an amount of tax and pass it to the US Internal Revenue Service. It applies to US citizens who make more than US$97,600 a year - about HK$63,000 a month.
"But practically, Hong Kong and the US are two jurisdictions so I have never seen any companies here which comply with this law," Yip said, adding there would be no penalty even in the case of non-compliance.
"Even the US companies in Hong Kong which have US employees don't do it … no wonder the pilots have such big reactions because no one has ever heard about it."
Cathay will start withholding tax from the second quarter of the year, and pilots said it would affect 300 to 500 of them - up to 18 per cent of cockpit crew.
The pilots said they already had to pay Hong Kong and US taxes, but before Cathay changed its policy they could file US taxes themselves once a year.
CPA Australia's divisional president for Greater China, Ronald Yam, and the chair professor of accounting at the University of Hong Kong, Amy Lau Hing-ling, said they had not heard of a local company withholding US employees' taxes.
As for Fatca, it was passed into law in 2010 but will only take effect in July this year.
The anti-tax evasion law requires foreign financial institutions such as banks to declare to US tax authorities the foreign holdings of anyone liable under US tax.
"The US Internal Revenue Service is actively seeking airlines flying into the US to ensure they are fully compliant with all US income tax requirements," Cathay said. "As an international airline flying into the US, we are working with the IRS on this compliance."
Cathay added that no disclosure of information would be made to the IRS without "notifying" the pilots.
Yip, an expert on Fatca, said that if Cathay did not comply, the US tax authorities would withhold 30 per cent of its US-source income.
He said it was "strange" that the tax authorities had demanded airlines declare pilots' financial details because airlines were not financial institutions.
Two American pilots employed by Cathay said the plans would create cash-flow problems for them. They also said that filing tax was a complex matter and they were concerned they might pay more than they should.
This article appeared in the South China Morning Post print edition as Cathay to withhold US pilots' wages for taxes
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Kacrazy, you total tw@t. I'll guarantee that CX have just read your gloating, imbecilic post and are reviewing it TODAY.
Have you forgotten that CX manages KA? KA's offices are in CX City. Same managers, operations, engineering, IOC, lawyers...
I give up.
Have you forgotten that CX manages KA? KA's offices are in CX City. Same managers, operations, engineering, IOC, lawyers...
I give up.
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It applies to US citizens who make more than US$97,600 a year - about HK$63,000 a month
...and pilots said it would affect 300 to 500 of them - up to 18 per cent of cockpit crew.
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Someone has gotten something wrong. Sounds like it's the SCMP which would not surprise me.
US nationals are, and always have been, subject to US withholding. For the most part, at least those of us who have been complying with the law HAVE already filled out a W-4 and are having appropriate levels of taxes withheld as well as receiving a W-2 every year which reports these to the IRS.
Strictly speaking foreign entities aren't required to report to the IRS but this might be modified by treaties and/or coercion by the US. US individuals ARE always required to ensure foreign sourced income is reported no matter where they receive it from and this is what has been happening as far as I know. While I guess theoretically a US national could try not to have tax withheld this also would result in penalties at year end for the US return and also in severe penalties if income were received and not declared.
Foreign crew are liable for HK taxes if their stay exceeds 60 days and then for the amount of crew days they spend in HK. This winds up being the fractional part of the year spent in HK less the HK exemptions and typically isn't very much. HK taxes are credited on the US returns.
A blanket withholding of 30% is not legal and would be subject to civil and potentially criminal proceedings by the IRS provided the person in question appropriately filled out a W-4 which sets the withholding rate based on the individuals' situation. This amount is ONLY withheld if someone refuses to fill out and submit the requisite paperwork (and I believe it was actually 28% but might be wrong).
US nationals are, and always have been, subject to US withholding. For the most part, at least those of us who have been complying with the law HAVE already filled out a W-4 and are having appropriate levels of taxes withheld as well as receiving a W-2 every year which reports these to the IRS.
Strictly speaking foreign entities aren't required to report to the IRS but this might be modified by treaties and/or coercion by the US. US individuals ARE always required to ensure foreign sourced income is reported no matter where they receive it from and this is what has been happening as far as I know. While I guess theoretically a US national could try not to have tax withheld this also would result in penalties at year end for the US return and also in severe penalties if income were received and not declared.
Foreign crew are liable for HK taxes if their stay exceeds 60 days and then for the amount of crew days they spend in HK. This winds up being the fractional part of the year spent in HK less the HK exemptions and typically isn't very much. HK taxes are credited on the US returns.
A blanket withholding of 30% is not legal and would be subject to civil and potentially criminal proceedings by the IRS provided the person in question appropriately filled out a W-4 which sets the withholding rate based on the individuals' situation. This amount is ONLY withheld if someone refuses to fill out and submit the requisite paperwork (and I believe it was actually 28% but might be wrong).
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Erm, okay, D & N.
It appears that the only folks who will be ruined by this are the (already pretty well-known) wise-guys who have been dodging US taxes for their whole career here.
Those who have been abiding by the IRS code and submitting W-4s, have nothing to worry about.
Unless, of course, they have been so **** with their finances, that this 1-year minor interruption to their cash-flow will wreak havoc.
Enjoy the 'freedom', you're paying for it.
It appears that the only folks who will be ruined by this are the (already pretty well-known) wise-guys who have been dodging US taxes for their whole career here.
Those who have been abiding by the IRS code and submitting W-4s, have nothing to worry about.
Unless, of course, they have been so **** with their finances, that this 1-year minor interruption to their cash-flow will wreak havoc.
Enjoy the 'freedom', you're paying for it.
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D&N,
You must be dense. Much of CX's growth in the next decade will be to or through the US. With the American government growing in terms of both size and scope, do you really wonder why CX doesn't tell the US to pound salt? I don't!
You must be dense. Much of CX's growth in the next decade will be to or through the US. With the American government growing in terms of both size and scope, do you really wonder why CX doesn't tell the US to pound salt? I don't!
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Ciao D & N,
I know I'm trolling here but, are you or are you not CX and/or American? If the answer to both of the above is no (and your sole purpose is to rustle the troops), then would you mind to kindly take your football and go play with yourself?
In other words, kindly, FO!
Cari saluti,
Soda
I know I'm trolling here but, are you or are you not CX and/or American? If the answer to both of the above is no (and your sole purpose is to rustle the troops), then would you mind to kindly take your football and go play with yourself?
In other words, kindly, FO!
Cari saluti,
Soda
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So, when you say "our boys" does that mean you are CX? No truth to that by the way. Would you care to provide some "facts". Doubtful, I know...Plus, what would any MAN pilot leaving have to do with US tax?
Thanks for the video. Nice use of a smokescreen to avoid answering the questions.
If you are KA, as you claim, why do you care if Yanks leave CX or not? Why do you care about this tax issue anyway? Especially if you're not a Yank. Just protecting the world from injustness I suppose. Good luck narrowing that down to less than 150 countries.
Soda
Thanks for the video. Nice use of a smokescreen to avoid answering the questions.
If you are KA, as you claim, why do you care if Yanks leave CX or not? Why do you care about this tax issue anyway? Especially if you're not a Yank. Just protecting the world from injustness I suppose. Good luck narrowing that down to less than 150 countries.
Soda
Last edited by sodapop; 9th Apr 2014 at 05:04.
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.????
No, but nice you'd out one of your own on here. Real nice guys. No wonder you can't get a pay rise etc... You guys will fight each other and sacrifice each other rather than put the effort into fighting the real problem(s). 
Sad to see it again and again and again.
I am Canadian with former ties to the U.S. If you must know.
I really hope we don't merge now. You guys are ruthless.
Still best of luck though.
Sad to see it again and again and again.
I am Canadian with former ties to the U.S. If you must know.
I really hope we don't merge now. You guys are ruthless.
Still best of luck though.
Last edited by Didacts and Narpets; 9th Apr 2014 at 07:44.
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D&N,
So.....is this a thread about a CX payrise? About a CX/KA merger? About phantom MAN-based crew supposedly quitting (not)? Or about withholding US tax--HINT YES!--?
I see you've deleted your earlier ridiculous posts. Thanks!
Soda
So.....is this a thread about a CX payrise? About a CX/KA merger? About phantom MAN-based crew supposedly quitting (not)? Or about withholding US tax--HINT YES!--?
I see you've deleted your earlier ridiculous posts. Thanks!
Soda
