Hong Kong signs tax exchange agreement with US
Hong Kong has signed its first ever tax information exchange agreement (TIEA), paving the way for its implementation of the US foreign account tax compliance act.
Signed last month, the TIEA was enacted following an order made by the head of the Government of Hong Kong, Leung Chun-ying.
It comes after Hong Kong established a legal framework for entering into TIEAs with other jurisdictions in July last year.
A statement from the Hong Kong Inland Revenue Department said the order will be tabled at the legislative council on 30 April for vetting.
It added that the TIEA will only take effect after Hong Kong has completed the necessary legislative procedures.
FATCA is part of the US Hiring Incentives to Restore Employment Act. It ensures that US persons, wherever they are located and in whatever investment vehicle they hold their assets, are paying the correct amount of US tax.
It requires foreign financial institutions to report information to the Internal Revenue Service about financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest.
When the act comes into force, those who are not compliant will suffer a 30% withholding tax on income and gross proceeds.
Australian treasurer Joe Hockey said the IGA will “minimise costs” by simplifying due diligence requirements, as well as broadening arrangements between the Australian Tax Office and the US IRS.