Hong Kong Issues Tax Information Exchange Guidance
Hong Kong’s Inland Revenue Department (IRD) has issued practice notes for the exchange of tax information upon requests received from double taxation treaty partners, and the domestic safeguards that exist following enactment of the Inland Revenue (Disclosure of Information) Rules.
Following the implementation of the standards of transparency and effective exchange of information of the Organization for Economic Co-operation and Development (OECD), it is confirmed that, as an international financial centre, Hong Kong remains supportive of efforts by the international community to promote transparency in tax administration.
The standards adopted by the OECD require: the existence of mechanisms for exchange of information upon request and the exchange of information for purposes of domestic tax law in both criminal and civil matters; strict confidentiality rules for information exchanged; and the availability of reliable information (in particular bank, ownership, identity and accounting information) and powers to obtain and provide such information in response to a specific request.
Hong Kong maintains a policy of negotiating comprehensive agreements for avoidance of double taxation (DTAs) and pursuing the effective exchange of tax information only within the ambit of a DTA. It will not enter into standalone agreements on the exchange of information on tax matters, also know as TIEAs. The statute under the Inland Revenue Ordinance (IRO) does not cater for such TIEAs.
The Inland Revenue (Amendment) Ordinance 2010 (IRAO) was crafted in such a way that it is only applicable to “arrangements … made with the government of any territory outside Hong Kong with a view to affording relief from double taxation in relation to income tax.”
The whole purpose of the IRAO is to enable the IRD to collect and disclose a taxpayer’s information in response to valid requests made by treaty partners for their own tax purposes. However, the IRO also provides that an officer of the IRD shall preserve secrecy with regard to all matters relating to the affairs of any taxpayer coming to his knowledge, except where disclosure is made to treaty partners.
The disclosure rules are intended to provide taxpayers with a set of fair procedures to protect their confidentiality and privacy rights. In particular, Hong Kong’s policy on the exchange of information is restricted to exchange upon request, and it will not agree to engage in automatic or spontaneous exchanges. It will only supply information, including bank information, upon specific and bona-fide requests received from the competent authority of a treaty partner in justifiable cases.
In addition, the disclosure rules also provide for a variety of procedural rights and safeguards for persons affected by the information exchange. Such rights and safeguards include not only a mere right to be informed about the information exchange, but also a right to correct both the information to be exchanged and the review of the IRD’s decision by the Financial Secretary.
Hong Kong’s Inland Revenue Department (IRD) has issued practice notes for the exchange of tax information upon requests received from double taxation treaty partners, and the domestic safeguards that exist following enactment of the Inland Revenue (Disclosure of Information) Rules.
Following the implementation of the standards of transparency and effective exchange of information of the Organization for Economic Co-operation and Development (OECD), it is confirmed that, as an international financial centre, Hong Kong remains supportive of efforts by the international community to promote transparency in tax administration.
The standards adopted by the OECD require: the existence of mechanisms for exchange of information upon request and the exchange of information for purposes of domestic tax law in both criminal and civil matters; strict confidentiality rules for information exchanged; and the availability of reliable information (in particular bank, ownership, identity and accounting information) and powers to obtain and provide such information in response to a specific request.
Hong Kong maintains a policy of negotiating comprehensive agreements for avoidance of double taxation (DTAs) and pursuing the effective exchange of tax information only within the ambit of a DTA. It will not enter into standalone agreements on the exchange of information on tax matters, also know as TIEAs. The statute under the Inland Revenue Ordinance (IRO) does not cater for such TIEAs.
The Inland Revenue (Amendment) Ordinance 2010 (IRAO) was crafted in such a way that it is only applicable to “arrangements … made with the government of any territory outside Hong Kong with a view to affording relief from double taxation in relation to income tax.”
The whole purpose of the IRAO is to enable the IRD to collect and disclose a taxpayer’s information in response to valid requests made by treaty partners for their own tax purposes. However, the IRO also provides that an officer of the IRD shall preserve secrecy with regard to all matters relating to the affairs of any taxpayer coming to his knowledge, except where disclosure is made to treaty partners.
The disclosure rules are intended to provide taxpayers with a set of fair procedures to protect their confidentiality and privacy rights. In particular, Hong Kong’s policy on the exchange of information is restricted to exchange upon request, and it will not agree to engage in automatic or spontaneous exchanges. It will only supply information, including bank information, upon specific and bona-fide requests received from the competent authority of a treaty partner in justifiable cases.
In addition, the disclosure rules also provide for a variety of procedural rights and safeguards for persons affected by the information exchange. Such rights and safeguards include not only a mere right to be informed about the information exchange, but also a right to correct both the information to be exchanged and the review of the IRD’s decision by the Financial Secretary.
