Ministry of Strategy and Finance of Republic o : Korea-Hong Kong Agreement on Automatic Exchange of Financial Account Information Signed

Korea-Hong Kong Agreement on Automatic Exchange of

Financial Account Information Signed

The government signed on January 23 the Korea-Hong Kong Agreement on the Automatic Exchange of Financial Account Information to Improve International Tax Compliance. According to the agreement, the two countries will annually exchange information with respect to reportable accounts held by the citizens of the other country on an automatic basis starting in 2019.

Although the two countries have provided the other with tax information upon request since 2016 when the Korea-Hong Kong double tax treaty entered into force, the agreement on regular and automatic exchange of information will provide a more effective way to avoid international tax evasion.

So far Korea has signed bilateral agreements on financial account information exchange with the US and Singapore[1], as well as the multilateral agreement on automatic exchange of financial account information[2]. Korea will work on bilateral exchange agreements with 45 countries in 2017, including the Netherlands, Belgium and Ireland, and is expected to add 31 countries in 2018 to the list of automatic exchange agreements in force.

The Korea-Hong King bilateral agreement is as follows:

AGREEMENT BETWEEN THE COMPETENT AUTHORITIES OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION OF THE PEOPLE'S REPUBLIC OF CHINA AND THE REPUBLIC OF KOREA

ON THE AUTOMATIC EXCHANGE OF FINANCIAL ACCOUNT INFORMATION TO IMPROVE INTERNATIONAL TAX COMPLIANCE

Whereas, the Governments of the Hong Kong Special Administrative Region of the People's Republic of China ('Hong Kong') and the Republic of Korea ('Korea') have a longstanding and close relationship with respect to mutual assistance in tax matters and desire to improve international tax compliance by further building on that relationship;

Whereas, the laws of the respective jurisdictions require or are expected to require financial institutions to report information regarding certain accounts and follow related due diligence procedures, consistent with the scope of exchange contemplated by Section 2 of this Agreement and the reporting and due diligence procedures set out in the Common Reporting Standard;

Whereas, Article 24 of the Agreement between the Government of the Hong Kong Special Administrative Region of the People's Republic of China and the Government of the Republic of Korea for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (the 'DTA'), authorizes the exchange of information for tax purposes, including the exchange of information on an automatic basis, and allows the competent authorities of Hong Kong and Korea (the 'Competent Authorities') to agree the scope and modalities of such automatic exchanges;

Whereas, Hong Kong and Korea have in place (i) appropriate safeguards to ensure that the information received pursuant to this Agreement remains confidential and is used solely for the purposes set out in the DTA, and (ii) the infrastructure for an effective exchange relationship (including established processes for ensuring timely, accurate, and confidential information exchanges, effective and reliable communications, and capabilities to promptly resolve questions and concerns about exchanges or requests for exchanges and to administer the provisions of Section 4 of this Agreement);

Whereas, the Competent Authorities desire to conclude an agreement to improve international tax compliance based on reciprocal automatic exchange pursuant to the DTA, and subject to the confidentiality and other protections provided for therein, including the provisions limiting the use of the information exchanged under the DTA;

Now, therefore, the Competent Authorities have agreed as follows:

SECTION 1

Definitions

1. For the purposes of this agreement ('Agreement'), the following terms have the following meanings:

(a) the term 'Hong Kong Special Administrative Region (Hong Kong)' means any territory where the tax laws of the Hong Kong Special Administrative Region of the People's Republic of China apply;

(b) the term 'Korea' means the Republic of Korea, and when used in a geographical sense, the territory of the Republic of Korea including its territorial sea, and any area adjacent to the territorial sea of the Republic of Korea which, in accordance with international law, has been or may hereafter be designated under the laws of the Republic of Korea as an area within which the sovereign rights or jurisdiction of the Republic of Korea with respect to the sea-bed and sub-soil, and their natural resources may be exercised;

(c) the term 'Competent Authority' means:

(i) in the case of Hong Kong, the Commissioner of Inland Revenue or the Commissioner's authorized representative; and

(ii) in the case of Korea, the Minister of Strategy and Finance or the Minister's authorized representative;

Please refer to the attached pdf for the full press release

[1]The Korea-US automatic exchange agreement entered into force in 2016, and the Korea-Singapore agreement will enter into force from 2018.

[2]Signed by 51 jurisdictions in October 2014