In December 2017, the Organisation for Economic Co-operation and Development conducted an assessment on Hong Kong's inclusion of certain retirement schemes and investment funds as jurisdiction specific low risk non-reporting financial institutions (NRFIs) for the purposes of the automatic exchange of financial account information regime (the AEOI), and concluded that these entities should not be considered NRFIs.

1. What schemes/funds will be affected?

The affected schemes / funds (the Affected Schemes) are:

  • MPF schemes;

  • ORSO registered schemes;

  • ORSO pooling agreements; and

  • approved pooled investment funds.

Going forward (after the legislative amendments have taken effect-please refer to section 3 below), there is a likelihood that the Affected Schemes will be generally classified as reporting financial institutions for the purposes of the AEOI.

2. What is the expected timeline?

The Government intends to make legislative amendments to remove the Affected Schemes from the list of NRFIs under the Inland Revenue Ordinance (the Legislative Amendments).Little information has been revealed regarding the exact timing of when the intended Legislative Amendments will take effect. However, the MPFA has indicated that the Affected Schemes should expect to be bound by the Legislative Amendments from as early as 1 January 2020.Importantly, we do not know at this stage the exact details of such future Legislative Amendments.

3. How will being a reporting FI affect the Affected Schemes?

Under the AEOI, Reporting FIs are required to:

  • identify financial accounts held by tax residents of reportable jurisdictions in accordance with the specified due diligence procedures;

  • collect the reportable information of these accounts;

  • furnish such information to the Inland Revenue Department.

4. How should MPF/ORSO service providers/employers get prepared?

If you are an MPF / ORSO service provideror employer, you should:

  • conduct a gap analysis between the AEOI obligations and your current practices and procedures to see what changes need to be made to the practices and procedures;

  • consider whether the schemes qualify for any of the exemptions for NRFIs;

  • review the schemes' constitutive and offering documents to ensure that you have the right to obtain the information for AEOI purposes;

  • review the personal information collection statements applicable to the members and investors to ensure that they can facilitate compliance with the AEOI;

  • review your KYC and due diligence procedures to ensure that you can effectively identify the reportable financial accounts;

  • (if you are an employer) liaise with your MPF/ ORSO service providers to delineate each party's roles and responsibilities to ensure AEOI compliance.

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