Hong Kong: Update to CRS Provisions
IRD includes not only protectors but also enforcers of the trust in the definition of the controlling person and increases the number of reportable jurisdictions to 126.
The Inland Revenue Department (IRD) of Hong Kong have recently announced changes to the CRS regulations to align the relevant provisions with the OECD’s requirements. Amendments Relating to Automatic Exchange of Financial Account Information in Tax Matters are set out in Part 4 of the Inland Revenue (Amendment) (No. 7) Bill 2018 (Amendment Ordinance).
The key updates and clarifications relate to the definitions of controlling persons, new accounts, entity, pre-existing accounts, and reporting year, among other terms.
Interestingly Hong Kong includes not only protectors but also enforcers of the trust in the definition of controlling person:
“controlling person, in relation to an entity if the entity is a trust means an individual who is the settlor, trustee, protector (if any), enforcer (if any), or a beneficiary or a member of a class of beneficiaries, of the trust; (…)”.
This imposes additional regulatory burden on Hong Kong Financial Institutions as not only should appointors of a passive non-financial entity (NFE) trust be identified for CRS purposes but also reported, if they are resident in one of the reportable jurisdictions.
Further in Part 4. 9 (2) of the Amendment Ordinance the IRD increased the number of reportable jurisdictions from 75 to 126 and provides clarification on effective reporting date per jurisdiction.
These amendments come into operation on 1 January 2020 and the IRD advised that the Guidance for Financial institutions shall be updated to reflect the new provisions of the Amendment Ordinance. The Guidance for Financial Institutions shall be published on the IRD website.
If you have any questions about how this impacts your due diligence and reporting obligation in Hong Kong, please to not hesitate to contact us at firstname.lastname@example.org.