Hong Kong receiving CRS reports

Is this significant for HNWIs?

In summary (and this is only a rough summary), "Financial Institutions" ("FI") in, say, BVI will have reported their "Reportable Accounts" to the appropriate authority in BVI who will then exchange with Hong Kong information in respect of those "Reportable Persons" who are Hong Kong tax resident (for the purposes of CRS) -noting of course that the same person could also be tax resident elsewhere.

Hong Kong's tax system is limited so the consequences from a tax perspective should be minimal. Many FIs in Cayman and BVI are investment funds and (generally) Hong Kong would not tax income and gains arising from such investments. Most FIs in the shape of banks will not be in so-called "offshore" centres. BVI companies carrying on business in Hong Kong (such as receiving rent from Hong Kong property) will most probably have a business registration in Hong Kong and be paying tax!

Hong Kong is a major centre for HNWIs and is actively targeting family offices. CRS information is quite detailed financial information - far more than just information relating to income or gains needed for tax purposes. It includes details of principal. What may be of interest in respect of HNWIs will be the information reported from various jurisdictions in respect of trusts - in particular the settlors.

It is not easy to find hard statistics as to the amount of information but many in the industry have some ideas. As an aside, the IRS website (in respect of FATCA - not the same as CRS- but similar enough) does contain a useful search engine in respect of GIIN numbers. Thus in the BVI there are 14164 FIs registered with the IRS. Of these 579 have "trust" or "settlement" in the name. A further 301 are "PTCs" (how the other 700+ BVI PTCs are dealing with FATCA is another topic!). However since most trusts will use the "Trustee Documented Trust" ("TDT") route, they won't have their own GIIN number (the trustee will most likely have 2 GIINs - one for itself and one in respect of TDTs. It is hard to quantify how many trusts are reporting. As a rough guess information from approx 100 of the PTCs is being reported to Hong Kong!

Based on my understanding of the information exchanged, the IRD in Hong Kong may be able to ascertain the value of trusts settled by Hong Kong resident settlors. This will be in the hundreds of billions of dollars- particularly in respect of Cayman, Bermuda, Singapore and the Channel Islands. This is because the Settlor's account value is regarded as the entire trust fund (and unlike certain rules of CRS does not distinguish between financial and non-financial assets). Information relating to distributions to discretionary beneficiaries is of less relevance. Likewise information in respect of protectors and other controlling persons.

How can Hong Kong ensure that it has a wider role in respect of this private wealth?