The Hong Kong government has released a consultation paper setting out detailed plans for automatic exchange of bank account information under the OECD international standard.
Previously Hong Kong has only disclosed this information upon request from treaty partners, and the information exchange now planned does not go as far as the multilateral disclosure specified by the OECD’s Common Reporting Standard (CRS). Instead it will be implemented as a series of bilateral agreements with selected jurisdictions, limited to those with which Hong Kong has signed a comprehensive double taxation agreement or tax information exchange agreement.
Financial services and treasury secretary K C Chan described this as a ‘pragmatic approach for Hong Kong’, its principal purpose being ‘to avoid being labelled as an uncooperative jurisdiction which will affect our position as an international financial centre’.
The consultation document sets out the technical definitions and procedures required to implement information sharing. These include:
- definitions and exclusions of financial institutions (FIs) for reporting purposes;
- the information FIs have to obtain from non-Hong Kong accountholders;
- the due diligence and reporting requirements FIs have to follow;
- powers granted to the Inland Revenue Department to collect relevant information from FIs and forward it to other jurisdictions;
- sanctions for non-compliance;
- confidentiality provisions. These are a sensitive issue, because Hong Kong has announced it will only share information automatically with jurisdictions that have adequate data protection law.
Respondents to the consultation can send their comments anonymously, although those comments will not be published.
The current target is to introduce an amendment bill into the Legislative Council in early 2016. FIs will need to start conducting due diligence procedures for their financial accounts in January 2017, with the first international data exchanges planned to begin by the end of 2018.