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HONG KONG’S FOREIGN ACCOUNT REPORTING REQUIREMENTS: A CRUCIAL GUIDE FOR TAXPAYERS AND FINANCIAL INSTITUTIONS
In a bid to combat offshore tax evasion, Hong Kong has entered into a Foreign Account Tax Compliance Act (FATCA) agreement with the United States. The FATCA agreement requires both countries to report account holders to each other, aiming to minimize and eliminate offshore tax evasion between the two nations.
What are the Reporting Requirements for Financial Institutions?
Foreign Financial Institutions (FFIs), including banks like Hang Seng Bank, are required to report U.S. account holder information, balances, and other details to the Internal Revenue Service (IRS). This includes information about individuals with U.S. connections, such as:
- Legal permanent residents
- Those with significant financial ties to the United States
What are the Reporting Requirements for U.S. Taxpayers?
U.S. taxpayers with foreign accounts in Hong Kong are also required to comply with FATCA reporting requirements. If you meet certain thresholds, you must file Form 8938, reporting:
- Institution information
- Balance and income information
Additionally, you may be subject to other reporting requirements, including:
- FBAR (FinCEN Form 114)
- Form 3520
- Form 3520-A
- Form 5471
- Form 8621
- Form 8865
Consequences of Non-Compliance
Failure to comply with FATCA reporting and offshore filing requirements can result in penalties, including those related to Form 8938. However, you may avoid or mitigate these penalties by making a voluntary disclosure or demonstrating reasonable cause.
What is the Common Reporting Standard (CRS)?
The CRS is another international reporting standard similar to FATCA. While the United States is not part of CRS, the two standards share similarities. Taxpayers who receive a FATCA letter may also be referred to as a FATCA CRS letter.
Expert Guidance for Complying with Foreign Account Reporting Requirements in Hong Kong
Our firm specializes in international tax and offshore disclosure, including issues related to FATCA Hong Kong. With a team led by a Board-Certified Tax Law Specialist with 20 years of experience, we have worked with thousands of clients on offshore disclosure matters, including FATCA and FBAR. If you are seeking guidance on complying with foreign account reporting requirements in Hong Kong, our experts are here to help.