All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

Hong Kong: Hong Kong signs Model 2 IGA under FATCA



Ayesha Lau

Darren Bowdern

Hong Kong and the US signed an intergovernmental agreement (IGA) on November 13 2014 that will facilitate compliance with FATCA by financial institutions in Hong Kong. Within Asia-Pacific, only Australia, New Zealand, Hong Kong and Japan have signed IGAs with the US Treasury to date, thereby defining their obligations and exemptions under FATCA and local law. In particular, the Hong Kong IGA covers certain exemptions for financial institutions or products, including Mandatory Provident Fund schemes, registered financial institutions with a local client base, certain investment advisers and investment managers established in Hong Kong.

While the Hong Kong IGA largely mitigates the need for FATCA withholding, there will still be cases where FATCA withholding could apply that is, where withholdable payments (US source income or proceeds from the sale of property that generates US source income) are made to overseas non-participating FFIs.

Under the IGA, foreign financial institutions (FFIs) in Hong Kong may rely on a set of streamlined due diligence procedures to screen and identify US indicia to locate US accounts and clients for reporting purposes. For example, in determining whether a new individual account is a US account based on a customised self-certification received from the applicant, rather than more esoteric procedures under FATCA regulations, such as the use of US-centric withholding certificates. FFIs are required, however, to confirm the reasonableness of such certification which can be accomplished by reference to other documents obtained during the account opening process.

FFIs are required to report the relevant account information of US taxpayers directly to the IRS under the Model 2 IGA adopted by Hong Kong. This is supplemented by group requests made by the IRS to the Hong Kong Inland Revenue Department for exchange of information on relevant US taxpayers at a government level on a need basis. We expect that local authorities will only be involved by exception.

One of the largest misconceptions about FATCA is that FFIs without US customers will not be impacted. While the reporting aspects of FATCA are reduced when there are no US customers, the primary responsibility conferred upon FFIs is to be able to identify US customers through the new client due diligence process as well as through pre-existing client remediation.

Furthermore, companies that are not normally considered financial institutions may still be considered FFIs under the Hong Kong IGA (that is, under the headings of custodial institution, depository institution, investment entity or specified insurance company) and may have due diligence and reporting requirements under FATCA.

Ayesha Lau ( and Darren Bowdern (


Tel: +852 2826 8028 & +852 2826 7166


more across site & bottom lb ros

More from across our site

The Italian government published plans to levy capital gains tax on cryptocurrency transactions, while Brazil and the UK signed a new tax treaty.
Multinational companies fear the scrutiny of aggressive tax audits may be overstepping the mark on transfer pricing methodology.
Standardisation and outsourcing are two possible solutions amid increasing regulations and scrutiny on transfer pricing, say sources.
Inaugural awards announces winners
The UN’s decision to seek a leadership role in global tax policy could be a crucial turning point but won’t be the end of the OECD, say tax experts.
The UN may be set to assume a global role in tax policy that would rival the OECD, while automakers lobby the US to change its tax rules on Chinese materials.
Companies including Valentino and EveryMatrix say the early adoption of EU public CbCR rules could boost transparency of local and foreign MNEs, despite the short notice.
ITR invites tax firms, in-house teams, and tax professionals to make submissions for the 2023 ITR Tax Awards in Asia-Pacific, Europe Middle East & Africa, and the Americas.
Tax authorities and customs are failing multinationals by creating uncertainty with contradictory assessment and guidance, say in-house tax directors.
The CJEU said the General Court erred in law when it ruled that both companies benefitted from Italian state aid.