News: Hong Kong corporations are required to report offshore activity

The Hong Kong Department of Internal Revenue (IRD) has begun sending inquiries to corporate taxpayers who have received tax breaks from the government on funds received from offshore jurisdictions. Now every Hong Kong company is obliged to report on its activities in offshore areas, as well as in those jurisdictions where it has an actual presence (substance) to implement the BEPS plan.

The regulator provides 30 calendar days for each corporate taxpayer to respond to a request. If within a month, the Hong Kong company does not respond to the regulator, then a local income rate in Hong Kong will be applied to the entrepreneur who enjoyed the benefits of his offshore income.

These IRD actions are related to the fact that Hong Kong participates in the OECD program to combat illegal financial transactions and tax evasion. The regulator also plans to engage in the automatic exchange of information with all members of the organization, as well as with those countries that have signed double tax treaties.

Through such actions, the administration of Hong Kong will receive all the necessary information, as well as be able to verify and verify all assets for their origin and legality. Representatives of the IRD note that this measure is forced because out of more than 11 billion US dollars that were transferred to Hong Kong from offshore jurisdictions, more than 40 per cent were not subject to income, were of “doubtful origin”, and were also used for illegal operations money laundering.

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