Hong Kong Leads Global Crypto Tax Transparency with New Framework: Report
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- Hong Kong to require annual crypto asset reporting for tax purposes, aiming to combat cross-border tax evasion.
- New framework to be based on 2018 financial information exchange, focusing on digital assets for tax compliance.
- Hong Kong plans full crypto reporting by 2026, fostering global tax cooperation and strengthening financial governance.
Hong Kong plans to implement a new regime that would make it mandatory for individuals and business to report their crypto assets for taxation purposes. The announcement was made on December 13, during the meeting of the Organization for Economic Co-operation and Development (OECD) Global Forum on Transparency and Effective Exchange of Information in Tax Matters. The framework is expected to help in the recovery of taxes on virtual currencies, thus fighting cross border tax evasion.
Tax paying residents of Hong Kong will be obliged to submit their cryptocurrency ownership and trading information once per year under the new regulation. This will be a continuation of the measure that the region has been taking to enhance on the tax compliance. The framework will be based on the Automatic Exchange of Financial Account Information in Tax Matters that has been implemented in Hong Kong since 2018 and will fully concern digital assets.
Crypto Reporting Framework Timeline
The government is looking to have the new crypto reporting framework completed by 2026, and then put into action by 2028. Once implemented, data retrieved from these reports will be disclosed to the international tax authorities and therefore foster international tax cooperation. This data exchange is intended for identifying possible cases of tax avoidance as well as to meet international standards of taxation.
According to Christopher Hui, the Secretary for Financial Services and the Treasury, this framework fits well into Hong Kong’s continuous measures to enhance international tax cooperation and compliance. He said that the additional reporting standards will further strengthen Hong Kong’s position as an international financial hub and a supporter of responsible tax jurisdictions.
Global Taxation of Digital Assets
Since 2018, Hong Kong has shared financial account information with partner jurisdictions every year, thus supporting the fight against tax evasion. Expanding the foundation with Crypto Asset Reporting, digital asset transactions are required to be altered to meet the same standards as fiat transactions.
The Hong Kong government added that consultations with stakeholders such as the industry players and the public will be made to arrive at the necessary legislative changes. The following will benefit from this consultation process to ensure that the regulations are correct and all stakeholders are considered.
With the taxation of virtual currencies being a relatively new area, countries around the world are rushing to adapt their laws to this new form of income, and Hong Kong’s desire to establish a transparent and clear approach to reporting standards shows that other jurisdictions should follow. Such an approach proves the city’s desire to stay the numero uno in terms of international financial governance and digital assets regulation.
