Circular to all Licensed Corporations and Registered Institutions concerning the U.S. Foreign Account Tax Compliance Act

Circular to all Licensed Corporations and Registered Institutions concerning the U.S. Foreign Account Tax Compliance Act

This Circular is issued for the purpose of drawing to the attention of licensed corporations and registered institutions the Foreign Account Tax Compliance Act (FATCA), which became law in the U.S. in March 2010 and becomes effective in 2014.

FATCA was enacted with the objective of preventing non-compliance with their U.S. tax obligations by U.S. taxpayers holding foreign accounts.  To this end, FATCA is principally concerned with the imposition of reporting requirements for –

• U.S. taxpayers in respect of their foreign financial accounts and offshore assets; and
• Foreign financial institutions (FFIs) in respect of foreign financial accounts held by U.S. taxpayers or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

It is the latter of these reporting requirements that may have implications for licensed corporations and registered institutions carrying on business in Hong Kong.

FATCA will require FFIs to report certain information concerning foreign financial accounts to the U.S. Internal Revenue Service (IRS), further details of which are available on the IRS website (http://www.irs.gov) by searching “FATCA”.  The Hong Kong Government has been in discussions with the U.S. Department of the Treasury, with the objective of concluding an inter-governmental agreement (IGA) designed to facilitate compliance with FATCA by FFIs in Hong Kong in a manner that reduces their overall reporting burden.

Licensed corporations and registered institutions are encouraged to consider whether they are affected by the obligations imposed on FFIs under FATCA and to note any announcement made by the Hong Kong Government advising that it has concluded an IGA with the U.S. Government.  If in doubt concerning their obligations under FATCA, licensed corporations and registered institutions are also encouraged to seek appropriate legal or other advice.

Licensing Department
Intermediaries Division
Securities and Futures Commission