On 25 March 2014, the Government of the Hong Kong Special Administrative Region (Hong Kong) signed an agreement with the Government of the United States of America (US) relating to the exchange of information relating to taxes. This is the first TIEA signed by Hong Kong.
Under the TIEA, Hong Kong and US agree, upon request, to exchange information “that is foreseeably relevant to the determination, assessment and collection of such taxes, the recovery and enforcement of tax claims, or the investigation or prosecution of tax matters”. The TIEA also provides the necessary basis for Hong Kong to exchange information with the US which relates to those financial institutions in Hong Kong that are required to report to the US tax authorities under the US Foreign Account Tax Compliance Act (FATCA).
FATCA generally requires US persons, including those who live outside the US, to report to the US tax authorities their financial accounts in respect of assets held by them in non-US jurisdictions, and requires foreign financial institutions including those in Hong Kong to report certain financial information in respect of their US clients. In Asia, only Japan has entered into an intergovernmental agreement with the US to be FATCA-compliant. Hong Kong is still in discussions with the US with regard to entering into a similar agreement that will help to facilitate compliance with FATCA by the financial institutions in Hong Kong. It is uncertain whether mainland China will enter into a similar intergovernmental agreement with the US to be FATCA-compliant; however, many mainland financial institutions in China have already been working on FATCA projects.
The TIEA will become effective after Hong Kong completes the necessary legislative procedures for bringing the agreement into force. A copy of the TIEA can be found here.