Update on the Status of Hong Kong Tax Treaties
Since our last Hong Kong tax news on the above subject, there are further development on the Hong Kong tax treaty network.
Exchange of information regime in Hong Kong
Whilst the report concluded that Hong Kong’s legal and regulatory framework generally ensures the availability of ownership information and accurate accounting records, however, some recommendations including the availability of Tax Information Exchange Agreements (“TIEAs”) have been made to ensure effective EoI in all circumstances. The Phase 2 review on Hong Kong’s progress toward full and effective EoI, i.e. an evaluation of Hong Kong’s implementation of the standard in practice, has started and the Global Forum’s Peer Review Group will meet in September 2013 to examine the report.
Currently the Hong Kong law only allows for EoI in cases of comprehensive double taxation agreements (“CDTAs”) but not under TIEAs. The Global Forum recommended that Hong Kong should enter agreements for EoI with all interested parties and ensure that the competent authority has the power to obtain all relevant information under all EoI agreements including TIEAs.
The Commissioner of Inland Revenue, who had previously indicated that Hong Kong would not enter into standalone EoI agreements, is under mounting international pressure for changing the legal framework to enable Hong Kong to enter into TIEAs with all relevant parties to ensure Hong Kong passes the Phase 2 review by the Global Forum.
On 24 April 2013, the government introduced the Inland Revenue (Amendment) Bill 2013 to the Legislative Council (“The Amendment Bill”). The Amendment Bill proposes to amend the Inland Revenue Ordinance and Inland Revenue (Disclosure of Information) Rules in relation to the EoI.
In brief, if the Amendment Bill becomes law, there will be the following changes to the current EoI regime in Hong Kong:
|
| Current regime | Effects of Amendment Bill |
1 | Instruments for EoI | Can only exchange information pursuant to a CDTA | Can exchange information pursuant to a CDTA or TIEA |
2 | Scope of EoI | Confined to taxes covered by the CTDAs | Can exchange information in relation to any tax imposed by the laws of Hong Kong or the contracting partner |
3 | Period covered | Information related to period prior to the effective date of the relevant CDTA cannot be exchanged | Information generated prior to the effective date of the relevant provisions of the CDTA can be exchanged provided that the information is related to :
|
4 | Person obliged to supply information | Only persons who have possession of the information requested | Persons who do not possess but have control of the information will also be obliged to supply the information |
The government has indicated that the proposed changes to our legal framework is to ensure Hong Kong to comply with the latest international EoI standard and to demonstrate its efforts in enhancing tax transparency. Without a legal framework for entering into TIEAs, there is a risk that Hong Kong will be labelled as an uncooperative jurisdiction and there may be possible sanctions. A legal framework for TIEAs allows for an alternative instrument for EoI for Hong Kong to choose in entering into EoI arrangements with jurisdictions which have low incidence of double taxation. It is understood that Hong Kong’s priority is CDTAs. A Bills Committee has been formed to consider the Amendment Bill.
This website uses cookies.
Some of these cookies are necessary, while others help us analyse our traffic, serve advertising and deliver customised experiences for you.
For more information on the cookies we use, please refer to our Privacy Policy.
This website cannot function properly without these cookies.
Analytical cookies help us enhance our website by collecting information on its usage.