Global

Details

  • Service: Tax, International Corporate Tax, International Executive Services, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 5/31/2012

Hong Kong - Tax information exchange agreements—a conundrum 

May 31:  The Hong Kong government recently issued a consultation paper to professional and industry groups, asking for their views as to whether the Inland Revenue Ordinance ought to be amended to provide a legal framework for entering into tax information exchange agreements.

In 2010, Hong Kong changed its rules to remove the domestic interest requirement for exchanging tax information under income tax treaties. This allowed Hong Kong to adopt the latest international standards and, in turn, to expand its network of income tax treaties from five treaties to 24 (with an additional four treaties having been concluded but awaiting formal signature).


The conundrum is if Hong Kong does not amend its legal framework to allow it to enter into tax information exchange agreements, it could be viewed as being an uncooperative jurisdiction, which could lead to some type of sanctions being imposed by other jurisdictions.


On the other hand, if Hong Kong amends its legal framework to allow for tax information exchange agreements, the concern is that there may be little incentive for jurisdictions to enter into income tax treaties with Hong Kong when they already have a tax information exchange agreement in place.


To read a May 2012 report on this issue, prepared by the KPMG member firms in China and Hong Kong: Tax information exchange agreements—a conundrum for Hong Kong (PDF 108 KB)




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