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Inland Revenue (Amendment) Ordinance 2018 gazetted
     The Inland Revenue (Amendment) Ordinance 2018 (the Ordinance) was gazetted today (February 2). The technical amendments on automatic exchange of financial account information in tax matters (AEOI) (i.e. clauses 5 to 11) under the Ordinance will come into operation on January 1, 2019, while other provisions take effect today.

     As an international financial centre, Hong Kong has been committed to enhancing tax transparency, combating cross-border tax evasion, and actively implementing AEOI as well as the Base Erosion and Profit Shifting (BEPS) package promulgated by the Organisation for Economic Co-operation and Development (OECD). Given the continued expansion in the scope and network of tax information exchanges in the international community, Hong Kong needs to move from the established bilateral approach for implementing various new tax standards to riding on the Multilateral Convention on Mutual Administrative Assistance in Tax Matters to implement the relevant initiatives.

     "The Ordinance provides the legal framework for Hong Kong to implement multilateral tax arrangements under the amended Inland Revenue Ordinance (IRO), thereby allowing more effective implementation of the arrangements relating to AEOI as well as automatic exchange of country-by-country reports (i.e. the reports in which multinational corporations set out the information such as amounts of revenue, profits and tax paid for their business operations in each jurisdiction) and spontaneous exchange of information on tax rulings under the BEPS package," a government spokesman said.

     The scope of information to be exchanged, be it conducted on a bilateral basis or under the Multilateral Convention, is generally the same. The Ordinance does not alter the high level of privacy and confidentiality safeguards currently applicable to the handling of tax information under the IRO.

     "After the passage of the Ordinance by the Legislative Council (LegCo), the Government has sought the assistance of the Central People's Government in depositing the declaration for territorial extension to the OECD so that the application of the Multilateral Convention shall be extended to Hong Kong. The Chief Executive-in-Council will be recommended to make an order to declare that the Multilateral Convention shall have effect in Hong Kong. The order to be made under the amended IRO will be subject to the scrutiny of LegCo by negative vetting," the spokesman added.

     The Ordinance also makes technical amendments to certain provisions on AEOI, so as to align them with the Common Reporting Standards promulgated by the OECD. These amendments (i.e. clauses 5 to 11) do not make substantial changes to the due diligence requirements for financial institutions (FIs). However, considering that reporting FIs will take time to fine-tune their systems and mode of operation in order to implement the refinements, the Government has specified that such provisions will only become effective on January 1, 2019. In other words, the existing AEOI provisions will continue to apply to FIs' reports due for mid-2019 (i.e. covering data in 2018), whereas the refined provisions will apply to FIs' reports due for mid-2020 (i.e. covering data in 2019) and thereafter.

     To allow Hong Kong to implement the new initiatives on international tax co-operation more effectively and reduce the risk of Hong Kong being identified as a "non-cooperative tax jurisdiction", the Government will strive to complete the procedures for participating in the Multilateral Convention as soon as practicable. Regarding the refinements on the arrangements relating to AEOI under the Ordinance, the Government will arrange briefings for reporting FIs, amend the relevant guidelines, and continue to provide support to FIs as appropriate.
Ends/Friday, February 2, 2018
Issued at HKT 12:00
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