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Hong Kong Produces Exchange Of Information Rules

Tuesday, February 16, 2010

The Hong Kong government has submitted the Inland Revenue (Disclosure of Information) Rules to the Legislative Council (Legco), that will enable Hong Kong to adopt the internationally-agreed Organization for Economic Cooperation and Development standard for the exchange of information (EoI) for tax purposes in double taxation agreements (DTAs).

The government has been able to produce the EoI rules following the passing last month by Legco of the Inland Revenue (Amendment) (No 3) Bill 2009.

"The rules put in place domestic safeguards in addition to those provided by individual DTAs to protect privacy and confidentiality of the information exchanged,” a government spokesman said. “The government has taken into account the suggestions of Legco members and the business and professional sectors when finalizing the rules.”

The rules require that, unless exceptional circumstances exist, the Inland Revenue Department (IRD) must notify a subject person before any information relating to that person is disclosed. The person may request a copy of the information and request the IRD to amend any information that the person considers factually incorrect.

The rules also stipulate that an EoI request can only apply to income taxes, has to be approved by a directorate officer of IRD, and must set out the information that a DTA partner has to provide to ensure that the requests are justified, specific and relevant. The rules also prevent the IRD from disclosing any information that relates to a period before the effective date of the relevant DTA.

The rules are now subject to the approval of the Legco under positive vetting procedures.