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Hong Kong: OECD peer review update



Ayesha Lau

Darren Bowdern

In October 2011 the Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) released a Phase 1 peer review report on Hong Kong. The report assessed Hong Kong's tax system for information exchange against the international standards of transparency and exchange of information for tax purposes. The report concluded that a number of Hong Kong's existing comprehensive double taxation agreements (CDTAs) did not provide for an effective exchange of information (EoI) and were in some instances unduly restrictive and inconsistent with the standard. These agreements contained a domestic interest condition as a requirement for the exchange of information.

Further, the Phase 1 report indicated that whilst Hong Kong's legal and regulatory framework ensures that "accurate, adequate and reasonably current information concerning legal ownership and control of companies, partnerships and trusts is maintained in Hong Kong", there were cases involving nominees, share warrants to bearer or private express trusts / foreign trusts where improvements were required.

Accordingly, the Global Forum recommended that Hong Kong improve the above-mentioned areas. It also recommended that Hong Kong continue to update and expand its network of agreements for international exchange of information in tax matters, regardless of their form, thereby ensuring that full exchange of information is available to all its agreement partners.

In a direct response to the Global Forum's recommendations, the Hong Kong Government enacted the Inland Revenue (Amendment) (No. 2) Ordinance 2013 in July 2013 to allow Hong Kong to enter into tax information exchange agreements (TIEAs). The Ordinance also enhanced the existing EoI arrangements under a CDTA to allow information exchanged to be used for other non-tax related purposes provided such use is permitted under the laws of both jurisdictions and such use is authorised by the competent authority of the supplying party.

The legislation also expanded the Commissioner of Inland Revenue's powers to allow him to obtain tax information in a person's control as opposed to the previous position where tax information could only be obtained that was in a person's possession. It is understood that the Inland Revenue Department (IRD) will shortly issue a revised version of Departmental Interpretation and Practice Note No. 39, "Exchange of information under comprehensive double taxation agreements". These guidelines should provide further clarity on the IRD's interpretation of "control", and how the EoI procedures will apply in practice.

The practical implementation of Hong Kong's legal and regulatory framework for transparency and exchange of information will be reviewed in the forthcoming Phase 2 peer review report. Hong Kong will be assigned a rating in November 2013 when its Phase 2 Report will be adopted. Hong Kong will receive a rating for the individual elements of the international standard and an overall rating – "compliant," "largely compliant," "partially compliant" or "non-compliant". It is likely that Hong Kong will be assigned a largely compliant rating.

Finally, on a similar note, Hong Kong continues to expand its CDTA network. Most recently, Hong Kong concluded its 29th CDTA with Qatar. The CDTA between Canada and Hong Kong, signed on November 11 2012 came into effect on October 29 2013 and will have effect in Hong Kong as from April 1 2014. Subsidiary legislation has also been lodged with the Legislative Council to give effect to the CDTAs with Italy, Guernsey and Qatar.

Ayesha Lau ( and Darren Bowdern (


Tel: +852 2826 8028 & +852 2826 7166


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