Hong Kong Account Holders: Prepare for AEOI Reporting

Hong Kong Account Holders: Prepare for AEOI Reporting

Those who hold an account (or are a controlling person) with Hong Kong Financial Institutions – both individuals and entities – must prepare to report their tax residency information to the Inland Revenue Department (IRD) by May 2018 for exchange with 75 reportable jurisdictions under the AEOI standard.

In September 2014, Hong Kong indicated its support for implementing automatic exchange of financial account information (AEOI) on a reciprocal basis with appropriate partners, with a view to commencing the first exchanges from 2018.

Under the AEOI standard, financial institutions in Hong Kong are required to identify financial accounts held by “tax residents of reportable jurisdictions” or held by passive non-financial entities whose controlling persons are tax residents of reportable jurisdictions, in accordance with due diligence procedures.

Required information of these accounts has to be collected and furnished to the IRD. Such information will be exchanged on an annual basis.

Determining tax residency

“Tax residents of reportable jurisdictions” refer to those who are liable to tax by reason of residence in the jurisdictions. 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 or, in the case of a company, the place of incorporation or the place where the central management and control of the entity is exercised.

Tax residence is determined under the domestic tax laws of each jurisdiction. There might be situations where a person qualifies as a tax resident under the tax residence rules of more than one jurisdiction, and therefore is a tax resident in more than one jurisdiction.

For the purposes of the Common Reporting Standard (CRS), the Account Holder (or Controlling Person) must disclose all its tax residences in the required self-certification.

The Account Holder (or Controlling Person) can refer to below criteria for considering whether they are considered as a Hong Kong tax resident.

Tax residency criteria for individuals

An individual is regarded as a tax resident of Hong Kong if:

(a) He/she ordinarily resides in Hong Kong; or

(b) He/she stays in Hong Kong for more than 180 days during a year of assessment or for more than 300 days in two consecutive years of assessment, one of which is the relevant year of assessment.


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