On 13 November 2014, Hong Kong became the 46th jurisdiction to officially sign an intergovernmental agreement (IGA) with the USA for the implementation of FATCA. Having previously agreed the terms of its IGA in substance on 9 May 2014, Hong Kong is only the sixth jurisdiction (after Switzerland, Japan, Chile, Austria and Bermuda) to sign an IGA based on Model 2 (Pre-existing TIEA or Double Tax Convention).
Under Model 2, financial institutions in Hong Kong will be able to register with, and will need to report information required by FATCA directly to, the US Inland Revenue Service. The Financial Services Branch (FSB) of the Treasury Bureau of the Government of Hong Kong Special Administrative Region have also published a series of FAQs setting out how the IGA will be applied and the various obligations of financial institutions in Hong Kong that arise.
It is this direct relationship that has made Model 2 largely unpopular. It is notable that the wider, global, common reporting standard (CRS) for automatic exchange of tax information, proposed by the OECD and officially endorsed by all OECD and G20 countries on 29 October 2014, is broadly based on the principles underpinning the US FATCA regime but adopts the approach under the Model 1 IGA (i.e. reporting information to domestic authorities). It will be interesting to monitor how jurisdictions, such as Hong Kong, choosing to sign a Model 2 IGA for FATCA will implement the CRS if and when the time comes.
On 13 November 2014, Hong Kong became the 46th jurisdiction to officially sign an intergovernmental agreement (IGA) with the USA for the implementation of FATCA. Having previously agreed the terms of its IGA in substance on 9 May 2014, Hong Kong is only the sixth jurisdiction (after Switzerland, Japan, Chile, Austria and Bermuda) to sign an IGA based on Model 2 (Pre-existing TIEA or Double Tax Convention).
Under Model 2, financial institutions in Hong Kong will be able to register with, and will need to report information required by FATCA directly to, the US Inland Revenue Service. The Financial Services Branch (FSB) of the Treasury Bureau of the Government of Hong Kong Special Administrative Region have also published a series of FAQs setting out how the IGA will be applied and the various obligations of financial institutions in Hong Kong that arise.
It is this direct relationship that has made Model 2 largely unpopular. It is notable that the wider, global, common reporting standard (CRS) for automatic exchange of tax information, proposed by the OECD and officially endorsed by all OECD and G20 countries on 29 October 2014, is broadly based on the principles underpinning the US FATCA regime but adopts the approach under the Model 1 IGA (i.e. reporting information to domestic authorities). It will be interesting to monitor how jurisdictions, such as Hong Kong, choosing to sign a Model 2 IGA for FATCA will implement the CRS if and when the time comes.
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