The Financial Services and the Treasury Bureau in Hong Kong is discussing the latest standard published by the Organisation for Economic Cooperation and Development (OECD) on automatic exchange of financial account information in tax matters.
Standard according to OECD:
- According to the new standard by the OECD, jurisdictions are required to collect from financial institutions account information of non-domestic tax residents and exchange the information with jurisdictions of residence of the account holders on an annual basis.
- In general, a person will be resident for tax purposes in a jurisdiction if he pays or should be paying tax required under the law. As the tax residence of account holders may change and the tax laws may differ among jurisdictions, account holders will have to verify and update their tax residence.
Hong Kong has signed so far 32 comprehensive avoidance of double taxation agreements and seven tax information exchange agreements with other jurisdictions. Those agreements define the exchange of information. An automatic exchange of information (according do OECD standard) does currently not comply with Hong Kong’s policy and legal framework at the moment.
Being one of the world’s most important financial centre, Hong Kong indicated in September, 2014 that it will support for implementing the new standard on a reciprocal basis with appropriate partners. The city targets the first information exchange by the end of 2018 and the necessary legislation has to be put in place by 2017 prior to the information exchange.
Below is a current overview of Hong Kong’s Tax Information Exchange Agreements and comments by the Inland Revenue Department.
Tax Information Exchange Agreements
According to the Inland Revenue Department Tax Information Exchange Agreements (TIEAs) are an important tool in Hong Kong’s efforts to combat tax evasion. The agreements:
- provide for the effective exchange of information between Hong Kong and its TIEA partners;
- enhance Hong Kong’s ability to administer and enforce its domestic tax laws.
Tax Information Exchange Agreements concluded
Here readers can see the current agreements.
Exchange of Information
Hong Kong is committed to enhancing tax transparency and preventing tax evasion. There are two types of exchange of information instruments: the exchange of information article incorporated in the Comprehensive Double Taxation Agreements / Arrangement (DTAs) and Tax Information Exchange Agreements (TIEAs).
Hong Kong’s treaty partners may make a request for exchange of information to the Hong Kong competent authority under the Exchange of Information article in the DTAs or TIEAs.
Mechanism to Exchange Information
Under the current mechanism, Hong Kong will:
- supply information upon receipt of a specific request from the competent authority of a treaty partner;
- authorise the exchange of information in relation to taxes covered by the DTA / TIEA;
- disclose information which relates to a period after the DTA / TIEA came into operation
- give prior notification to the subject person before the information is exchanged unless exceptional circumstances exist; and
- endeavour to furnish a reply to the treaty partner within 90 days after receipt of a request for exchange of information.
The subject person concerned will have the right to request a copy of the information and to amend factual errors. The person can appeal to the Financial Secretary if the amendment request is refused by the Commissioner of Inland Revenue.
List of references:
http://www.scmp.com/business/money/ article/1819414/hong-kong-needs-catch-latest-global-tax-standards [Hong Kong needs to catch up with latest global tax standards, SCMP, Professor Chan Ka-keung, 09.06.2015]
http://www.ird.gov.hk/eng/tax/dta_tiea.htm [Tax Information Exchange Agreements, Inland Revenue Department, 22.06.2015]
http://www.ird.gov.hk/eng/tax/ dta_tiea_agreement.htm [Tax Information Exchange Agreements concluded, Inland Revenue Department, 22.06.2015]
http://www.ird.gov.hk/eng/tax/dta_eoi.htm [Exchange of Information, Inland Revenue Department, 22.06.2015]