The Hong Kong government on October 12 announced that, in response to its public consultation, it will make changes to a legislative proposal to implement the new international standard on automatic exchange of financial account information in tax matters (AEOI).
The following decisions were reached regarding the April AEOI proposal:
- The definitions of financial institutions (FIs), non-reporting FIs, and exempted accounts will remain more or less intact. In the light of feedback, we will ensure that certain trust companies beyond the coverage of the OECD’s Common Reporting Standard (CRS) will not be unnecessarily caught in our domestic legislation. We will also state explicitly in the proposed legislation that Mandatory Provident Fund Schemes, Occupational Retirement Schemes and Credit Unions registered under the relevant statutes will be “non-reporting FIs” and that dormant accounts will be excluded.
- It remains our proposal to impose a mandatory requirement for FIs to carry out the due diligence procedures set out in the CRS to identify and collect information on reportable accounts with account holder’s tax residence corresponding to Hong Kong’s AEOI partners (so-called “targeted approach”). However, in the light of feedback, we are inclined to provide a clear legal basis which at the same time allows FIs to pursue a “wider approach” to cover account holders with other tax residences.
- On the proposed penalties for FIs and employees, it is essential to put in place appropriate penalty provisions to provide for sufficient deterrent effect to ensure effective implementation of the AEOI regime in Hong Kong. We will keep the sanctions for FIs, and will also make it clear that the relevant sanctions will apply to service providers engaged by FIs to fulfill their due diligence and reporting obligations. As regards employees, in the light of feedback, we will refine the proposed sanctions by confining them to employees who have caused or permitted the FIs to provide incorrect return in a willful manner. “We are working on the draft amendment bill, which will incorporate the latest features as set out in the consolidated response. We will press ahead to introduce the bill into the Legislative Council in early 2016, so as to meet the implementation plan. We are working under a very tight timetable,” the spokesman added.
Hong Kong expects to commence AEOI by the end of 2018.
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