Hong Kong is taking actions on automatic exchange of information

On 30 June 2016, the new tax law on implementing automatic exchange of information (AEOI) in Hong Kong has become effective. AEOI is the international standard for automatic exchanging of financial account information in tax matters as published by the Organization for Economic Co-operation and Development (OECD) in July 2014. 

Hong Kong targets to identify appropriate jurisdictions as its potential AEOI partners, conclude negotiations with them and start the first exchanges by the end 2018. 

Briefly, AEOI requires financial institutions (FIs) to perform due diligence procedures to identify financial accounts held by tax residents of reportable jurisdictions. AEOI also requires FIs to collect and submit the reportable information of these accounts to the Hong Kong tax authority, which will in turn exchange the information with the tax authorities of AEOI partner jurisdictions on an annual basis.

“Tax residents of reportable jurisdictions” refer to those who are liable to tax by reason of residence in the jurisdictions with which Hong Kong has entered into an AEOI arrangement. 

The salient points of the new tax law are as follows: 

• Scope of FIs (FI is widely defined), reporting FIs and reportable financial accounts

• Obligations of reporting FIs 

• Scope of reportable information to be maintained, submitted and exchanged 

• Enforcement powers of the Hong Kong tax authority 

Information to be furnished by reporting FIs include: 

(1) The name, address, jurisdiction of tax residence, tax identification number and the date and place of birth (for individuals) of the account holder 

(2) The account number 

(3) The account balance or value 

(4) The income (e.g. interest) paid to the account 

FIs may request account holders to provide selfcertifications on their personal information including tax residence, so as to enable FIs to identify those accounts which should be reported under the AEOI regime. To facilitate the checking of tax residency by account holders, the OECD has established a portal which provides information on tax residency rules in jurisdictions which have committed to implementing AEOI. The website address is as follows: http://www.oecd.org/tax/automatic-exchange/crsimplementation-and-assistance/tax-residency/#d. en.347760  

‍