Hong Kong: Hong Kong signs Model 2 IGA under FATCA

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Hong Kong: Hong Kong signs Model 2 IGA under FATCA

lau.jpg

bowdern.jpg

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 (ayesha.lau@kpmg.com) and Darren Bowdern (darren.bowdern@kpmg.com)

KPMG

Tel: +852 2826 8028 & +852 2826 7166

Website: www.kpmg.com/sg

more across site & shared bottom lb ros

More from across our site

Wim Wuyts, who had been head of the specialist tax network since 2017, is moving on to a new role with WTS’s Belgian member firm
MNEs are increasingly using algorithmic tools in TP. Sahasranshu Dash argues that data ethics should therefore plug directly into the TP design process
The Institute of Chartered Accountants in England and Wales also queried whether HMRC resources could be better spent scrutinising larger entities
Grant Thornton’s Austria tax head likens his practice to an escape room, shares his football coaching ambitions, and explains why tax is cool
Awards
ITR is delighted to reveal all the shortlisted nominees for the 2025 EMEA Tax Awards
Awards
ITR is delighted to reveal all the shortlisted nominees for the 2025 Asia-Pacific Tax Awards
The fates of pillars one and two hang in the balance after the US successfully threw its weight around in G7 and Canadian negotiations
Rafael Tena tells ITR about the ‘crazy’ Mexican market, ditching the hourly rate, and refusing to grow his fledgling firm in an ‘unstructured way’
It should be easy for advisers to be transparent about costs, Brown Rudnick partner Matthew Sharp said in response to exclusive ITR in-house data
The sprawling legislation phases out Joe Biden-era green tax incentives for businesses; in other news, the UK will reportedly maintain its DST despite US pressure
Gift this article