On 16 March 2017, Hong Kong and Belgium signed an Agreement on the Automatic Exchange of Financial Account Information to Improve International Tax Compliance (the “Competent Authority Agreement”).
An agreement for the automatic exchange of financial account information is a bilateral tax treaty which authorizes the parties thereto to exchange information for tax purposes on an automatic basis. It fits within the broader framework of the so-called Common Reporting Standard (“CRS”) developed by the G20 and the OECD, which aims at improving (automatic) exchange of information for tax purposes between participating member states.
Specifically, under the Competent Authority Agreement and pursuant to both parties’ domestic legislative frameworks, financial institutions that are based in Belgium and Hong Kong will be required to report on the information of financial accounts held by tax residents of the other jurisdiction. Such reporting will be aggregated by the relevant authorities and will be automatically exchanged on an annual basis with the other jurisdiction’s competent authority. It is expected that information is to be first reported with respect to the period commencing on 1 July 2017 (or possibly on an even earlier date as may be stipulated in the domestic laws of Hong Kong) and ending on 31 December 2017. All subsequent reporting periods will then be based on the corresponding calendar years.
The information to be exchanged includes the name, address and identity card or business registration number of the account holders, the account number, the account balance, and the amount of interest or other income paid or credited to the account during the calendar year.
The Competent Authority Agreement will now first have to pass through the national ratification procedures in Belgium and Hong Kong. In principle, the agreement will come into effect on the date of the later of the notifications provided by each competent authority confirming that its jurisdiction has the necessary laws in place to implement the agreement. Moreover, in the slipstream of the Competent Authority Agreement, it is expected that certain changes will now also be brought about to the exchange of information clause laid down in the bilateral income tax treaty concluded between Belgium and Hong Kong.
On the same date as the Hong Kong - Belgium agreement, similar agreements were signed between Hong Kong and half a dozen other jurisdictions, being Canada, Guernsey, the Netherlands, Italy and Mexico in addition to Belgium. They joined Japan, Korea and the United Kingdom, bringing the total number of Hong Kong’s competent authority agreements to nine. More agreements are expected to follow in the coming months as Hong Kong is under pressure to accelerate its number of bilateral competent authority agreements in order to avoid its being blacklisted by the EU as a non-cooperative tax jurisdiction.