What should you do?
Determining whether your organisation is a financial institution under these rules is the first and most crucial step.
Financial institutions must register with the tax authorities. For Hong Kong financial institutions this will be the Hong Kong IRD and, in some cases, the US Internal Revenue Service (IRS).
Specific due diligence procedures are required of financial institutions to identify potentially reportable account holders or beneficial owners. These will be account holders or beneficial owners who are resident outside of Hong Kong in another jurisdiction or who (for FATCA purposes), are US persons. The prescribed procedures on how this must be done are very detailed and there’s a penalty regime for financial institutions which fail to comply.
An annual CRS report must be filed with the IRD by Hong Kong financial institutions by 31 May following the calendar year in question. The report must include details of any reportable accounts or beneficial owners, including the value of the account or equity interest and where the account holder is resident for tax purposes. This information is then exchanged by the IRD with the relevant jurisdictions.
Separately, an annual FATCA report must be filed directly with the IRS to report US account holders. The due date for filing the report is 31 March following the calendar year being reported.
As part of this process, many account holders (both individuals and entities) will be receiving self-certification forms from the financial institutions they have accounts with. The information that is included in these forms will allow the financial institutions to determine the tax residence and classification of the account holder under the two AEOI regimes.
In many cases, these forms are detailed, complicated and confusing, but the account holder is responsible for completing their own forms. The financial institutions cannot provide legal or tax advice. Therefore, if the account holder has questions about how to complete the forms, they will need to contact a tax adviser.