Inland Revenue (Amendment) (No. 3) Ordinance 2016 comes into effect on June 30, 2016

"By providing a legal framework in Hong Kong for implementing automatic exchange of financial account information in tax matters (AEOI), the Inland Revenue (Amendment) (No. 3) Ordinance 2016 (the Amendment Ordinance) enables Hong Kong to deliver its pledge of support for the new international standard on AEOI as promulgated by the Organisation for Economic Cooperation and Development (OECD)," a HKSAR Government spokesman said.

Under the AEOI standard, a financial institution (FI) is required to identify financial accounts held by tax residents of reportable jurisdictions in accordance with the OECD due diligence procedures. FIs are required to collect the reportable information of these accounts and furnish such information to the Inland Revenue Department (IRD). The IRD will exchange the information with the tax authorities of the AEOI partner jurisdictions on an annual basis.

"Tax residents of reportable jurisdictions" refers to those who are liable to tax by reason of residence in the jurisdictions with which Hong Kong has entered into an AEOI arrangement. In general, whether or not an individual is a tax resident of a jurisdiction is determined by having regard to the person's physical presence or stay in a place (e.g. whether over 183 days within a tax year) or, in the case of a company, the place of incorporation or where the central management and control of the entity lies.

Unless an account holder is a tax resident of another jurisdiction which has signed AEOI agreement with Hong Kong, FIs in Hong Kong do not need to report the information of such an account to the IRD. FIs may request account holders to provide self-certifications on their personal information including tax residence, so as to enable FIs to identify those accounts which should be reported under the AEOI regime.

Following the passage of the Amendment Ordinance, Hong Kong will start identifying partners from among the 42 economies who have signed agreements with Hong Kong on comprehensive avoidance of double taxation or on tax information exchange.

The time-frame for Hong Kong to commence the first information exchanges is by the end of 2018.

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