May 2013 - Exchange of information regime: further developments in Hong Kong

In the April 2012 issue of Mazars Hong Kong tax news, we reported that the Global Forum on Transparency and Exchange of Information for Tax Purposes (“The Global Forum”) of the Organization for Economic Co-operation and Development had completed Phase 1 of Hong Kong’s Peer Review on the implementation of international standard on Exchange of Information (“EoI”) (report published in October 2011).

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. 


Proposed legislative changes

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. 


Key features

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


Instruments for EoI

Can only exchange information pursuant to a CDTA

Can exchange information pursuant to a CDTA or TIEA


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


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 :

  • Carrying out of the provision of the CDTA / TIEA regarding any periods after the said CDTA / TIEA has come into effect
  • Administration / enforcement of the tax law of the jurisdiction requesting the information regarding any periods after the CDTA / TIEA has come into effect


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. 

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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.

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