Further to our article in April, New Challenges To Consider When Opening An HK Corporate Account, the tax legislation regarding implementing Automatic Exchange Of Information (AEOI) or the Common Reporting Standard (CRS) in Hong Kong was announced and officially came into effect on 30 June 2016.
The Inland Revenue Department (IRD) says the time-frame for implementation is very tight as Hong Kong will begin the first exchanges of information by the end of 2018(1). The HKSAR Government’s aim is to identify suitable candidates to be AEOI partners and to finalize negotiations by the end of this year. Meanwhile, Financial Institutions (FIs) will be expected to register with the IRD by September 2017 and file the first AEOI returns by May 2018 in time to transmit to the relevant AEOI partners(2).
Whereas technically FIs only need to submit information relating to tax residents of AEOI partners, the relating Ordinance (Inland Revenue (Amendment) (No.3) Ordinance 2013(3)) provides that due diligence procedures may be carried out on accounts held by tax residents of non-reportable jurisdictions. The purpose of this being to be prepared for when new jurisdictions become AEOI partners.
The required information that FIs are being asked to report under the Ordinance (Sections 50F and 50G) are comprehensive. As such with the deadlines for the implementation of the AEOI being very tight FIs are focused on obtaining the information required from existing and new clients in order to meet the new international standards aimed at enhancing tax transparency and fighting against cross-border tax evasion. As such, whether an existing or potential customer, everyone will be required to disclose a lot more information than before and that they may not be comfortable disclosing.
In summary, while the first exchanges of information will take place in late 2018, FIs have already started collecting the information required and everyone will be impacted with no exception. If you want to know more about the implementation of the AEOI in Hong Kong you can refer to the dedicated FAQ’s section of the IRD’s website.
Double Taxation Relief and Exchange of Information Arrangements – Automatic Exchange of Financial Account Information (“AEOI”). http://www.ird.gov.hk/. Retrieved 19 July 2016.
Hong Kong can now carry out international automatic exchange of information. http://www.pwchk.com/home/eng/hktax_news_jul2016_7.html. Retrieved 19 July 2016.
Inland Revenue (Amendment) (No.3) Ordinance 2016. http://www.gld.gov.hk/egazette/pdf/20162026/es12016202622.pdf. Retrieved 19 July 2016.