Automatic Exchange of Financial Account Information (AEOI)
Hong Kong is one of the more than 100 jurisdictions that will participate in the automatic exchange of financial account information (“AEOI”) and implement the Common Reporting Standard (“CRS”) for the purpose of enhancing tax transparency and fighting against cross-border tax evasion.
Pursuant to the AEOI/CRS, certain information in relation to financial accounts held by individuals and entities with overseas financial institutions may be automatically exchanged, on an annual basis, to tax authorities of jurisdictions in which those individuals and entities are a tax resident.
Automatic Exchange of Financial Account Reportable Jurisdictions
Currently, Hong Kong has 11 AEOI partners that all have signed a bilateral Competent Authority Agreement (“CAA”). These are: Japan, the United Kingdom, Belgium, Canada, Guernsey, Italy, Korea, Mexico, the Netherlands, Portugal and South Africa. Hong Kong intends to have about 74 AEOI partners with a priority for:
- Those jurisdictions that have indicated interests in conducting AEOI with Hong Kong
- Hong Kong’s existing double tax treaty partners that are also committed to AEOI
- The member states of the European Union.
Please note that a jurisdiction shall only become a ‘reportable jurisdiction’ under the Hong Kong AEOI rules after a CAA has been signed and after relevant domestic legislation has been enacted.
Start of the Period during which Information is being Exchanged
The earliest period that Hong Kong will start providing financial account information is 1 January 2017 to 31 December 2017 and will be with the countries Japan and the United Kingdom. As for the other 72 AEOI partners, the first financial account information to be exchanged by Hong Kong will relate to the period 1 July 2017 to 31 December 2017.
It should be noted that pursuant to the CRS, the Hong Kong financial institutions will be required to submit the reportable financial account information, covering the aforesaid periods, to the Hong Kong Inland Revenue Department in May 2018, which department will then subsequently exchange the information to the respective ‘reportable jurisdictions’ in September 2018.
Initiatives to be Taken by Account Holders
Various financial institutions in Hong Kong have been conducting due diligence procedures in order to be able to identify the reportable financial accounts, held by corporates and individuals (including existing and new financial accounts). It is however suggested for account holders to ensure that the information maintained with the financial institutions is correct and complete.
In addition, account holders are recommended to ascertain their tax residency as well as thoroughly review their tax position, so as to ensure that the required tax reporting and payment obligations will be fully complied with and/or is complete.