Global Reach, Local Touch
HONG KONG – Hong Kong participates in the Multilateral Convention to accelerate the pace of carrying out the Automatic Exchange of Information (“AEOI”)
The Hong Kong Inland Revenue Ordinance (“IRO”) was amended in June 2016 to provide a legal framework for Hong Kong to implement Common Reporting Standard (“CRS”) together with the AEOI, and was further amended in June 2017 to expand the list of reportable jurisdictions to cover 75 jurisdictions, which comprises 14 confirmed AEOI partners and 61 prospective AEOI partners.
Under the laws, a reporting financial institution (“FI”) in Hong Kong is required to identify the financial accounts held by the tax residents of reportable jurisdictions (i.e. tax residents who are liable to tax by reason of residence in the jurisdictions with which Hong Kong has entered into an AEOI arrangement).
On an annual basis, the reporting FIs will need to collect and submit to the Hong Kong Inland Revenue Department (“IRD”) the information of these reportable financial accounts. The IRD will then transfer the information collected from the reporting FIs to the tax authorities of the relevant AEOI partners. The first exchange will be conducted by the end of 2018.
Until recently, Hong Kong has to negotiate with other jurisdictions for AEOI on a bilateral basis, which was found to be a time consuming process.
On 6 October 2017, the Inland Revenue (Amendment) (No. 5) Bill 2017 was gazetted to pave the way for Hong Kong's participation in the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (“Multilateral Convention”), and to align the IRO with CRS by removing inconsistencies identified.
The Multilateral Convention will be an effective platform for Hong Kong to implement with other jurisdictions the AEOI and other international tax-cooperation areas such as base erosion and profit shifting.
Any non-Hong Kong entities or individuals holding financial accounts in Hong Kong should be aware that the reporting FIs in Hong Kong have already commenced their due diligence review procedures for AEOI purposes since 1 January 2017.
Reportable account holders should understand whether they will be regarded as Hong Kong tax residents under relevant local tax laws, and what information will have to be reported and exchanged.
Also, the participation of Hong Kong in the Multilateral Convention will accelerate the pace of AEOI between Hong Kong and other CRS jurisdictions.
For further information or advice concerning the implementation of AEOI in Hong Kong or any advice with respect to Hong Kong taxation, please contact David Cho at firstname.lastname@example.org, Henry Fung at email@example.com and Candice Ng at firstname.lastname@example.org.
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