Hong Kong has signed agreements with six jurisdictions to automatically exchange financial account information in tax matters.
The agreements expand Hong Kong’s Automatic Exchange Of Information (AEOI) network to include Belgium, Canada, Guernsey, Italy, Mexico, and the Netherlands. These countries join Japan, Korea, and the UK as “reportable jurisdictions” for AEOI purposes in Hong Kong.
Before these agreements can take effect however HK will have to pass local legislation compelling its Banks to share the relevant information. Given how much Hong Kong’s Banking Sector contributes to the local economy (and the amount of power the Banks can bring to bear as a lobby group) it remains to be seen whether the relevant legislation will ever be passed.
If you live in any of the affected countries (ie Belgium, Canada, Guernsey, Italy, Mexico, the Netherlands, Japan, Korea, or the UK) and are concerned about maintaining financial privacy, and you have currently a personal account in Hong Kong (or a Company bank account where you are the beneficial owner of the Company) you have in effect 2 choices:
1. Close your account and move it to a bank in a country which has not (i) signed an EOI Treaty with your home country or (ii) signed on to the OECD’s Multi Competency Authority Agreement aka the MCAA (ie the vehicle which gives rise to Automatic Exchange of Financial Information – you can check the list of countries which have signed by clicking on this link: https://www.oecd.org/tax/automatic-exchange/international-framework-for-the-crs/MCAA-Signatories.pdf )
2. (If you are the beneficial owner of a Company which banks in Hong Kong) Set up a Seychelles Foundation to hold the shares of your Company.
Why Register a Seychelles Foundation?
If you are a resident or citizen of a country which has the ability to track Offshore Bank account beneficiary details and you would like to keep private details of your Offshore earnings (or if you plan to set up a very sensitive business eg one that might illegal if owned/operated from where you live) again a Seychelles Foundation can help:
It all comes down to the legal structure/operation of the Seychelles Private Interest Foundation.
Bottom line is notwithstanding that individuals (or a class of beneficiary) may be named as beneficiaries in the Regulations:
- The beneficiaries have no legal or beneficial interest in property owned by the Foundation (unless or until such time as that property is transferred to them – see section 71 of the Seychelles Foundations Act).
- The Foundation is a legal entity in its own right not a mere Trustee (See section 23 of the Seychelles Foundations Act)
- The Councillor of the Foundation owes no Fiduciary duty to the beneficiaries (see section 63 of the Seychelles Foundations Act. Note you can download a copy of the Seychelles Foundations Act by clicking on the relevant button in this linked page: http://www.seylii.org/sc/legislation/act/2009/32 )
What does all this mean?
If a Seychelles Foundation owns a Company and the Company owns property or money in the bank as a matter of law the Legal AND Beneficial owner of the Company (and any funds it has at bank) is the Foundation.