Chen Haolian: Will implement the revised CRS before 2028 in hopes of establishing legislation for the cryptocurrency asset reporting framework.

Deputy Secretary for Financial Affairs and the Treasury, Chen Haolam, said earlier that when attending the Annual Tax Seminar organized by the Association of Chartered Certified Accountants (ACCA) Hong Kong Branch, Hong Kong plans to implement the amended Common Reporting Standard (CRS) before 2028. He noted that the Organization for Economic Co-operation and Development (OECD) has released the Crypto-Asset Reporting Framework (CARF) so that each tax jurisdiction can automatically exchange information on crypto-asset transaction data, thereby enhancing transaction transparency. The Legislative Council has supported the plan last month, with the goal of completing the legislation within this year.

Chen Haolam said that the OECD has revised the CRS by bringing new digital financial products such as central bank digital currency (CBDC) into scope, and by optimizing the reporting and due diligence requirements for financial institutions. Hong Kong plans to implement the amended CRS before 2028, and to conduct its first exchange of information with participating tax jurisdictions by 2029. Implementing the CRS and CARF will have far-reaching significance for strengthening Hong Kong as an international asset management and financial hub.

Chen Shiwai: Simplified effective tax rate safe harbor will take effect this year

The Commissioner of Inland Revenue, Chen Shiwai, said the industry has been paying close attention to the optimization arrangements for the preferential tax regimes relating to funds, family investment holding instruments, carried interests, and corporate treasury centers (CTC), as well as the administrative arrangements for and implementation of CARF to improve the automatic exchange of financial account information. He said Hong Kong has been advancing the implementation of Pillar Two in line with the international agreed timetable; the first phase of the Pillar Two website was launched in January this year, and the second phase will be rolled out in the fourth quarter. The simplified effective tax rate safe harbor will take effect this year to reduce compliance burdens for large multinational enterprises. The main optimization measures under the unified fund exemption regime include expanding the definition of “fund” to cover certain types of “single investor fund” structures, broadening the scope of eligible investment and profits that are eligible for exempt profits tax, and relaxing the treatment of certain entities for special purposes to accommodate arrangements for co-investment.

Regarding AEOI and CARF, following the earlier public consultation, the Inland Revenue Department has proposed amendments to the Inland Revenue Ordinance in respect of AEOI, including requiring reporting financial institutions to register with the Inland Revenue Department, optimizing requirements for maintaining due diligence records, and strengthening penalties. The CARF-recommended amendments will be announced within the year. In addition, the government plans to put forward proposals around mid-year on optimizing measures for CTC, involving deductions for interest paid to non-Hong Kong associated corporations, taxation issues on interest received from the CTC, as well as certain eligibility conditions and anti-abuse rules, to consolidate Hong Kong’s position in international asset management.

Zheng Jiesheng, chairman of the ACCA Hong Kong Branch, said that the global tax environment is changing rapidly. Geopolitical turmoil and slowing economic growth have led countries to re-examine their tax systems. Changes to tax rules have become a key factor affecting companies’ global business arrangements, capital flows, and competitive advantages.