Hong Kong mandates crypto transaction disclosures to tax authorities

Hong Kong has recently passed legislation demanding cryptocurrency service providers to begin collecting customer and transaction data from 2027, allowing the city's tax authorities to share these records with overseas counterparts starting in 2028. The Inland Revenue (Amendment) (Crypto-Asset Reporting Framework and Amended Common Reporting Standard) Bill, approved by the Legislative Council on November 4, integrates the Crypto-Asset Reporting Framework (CARF) established by the Organisation for Economic Co-operation and Development.

Businesses meeting certain criteria linked to Hong Kong will face registration, due diligence, and reporting requirements, regardless of whether their customers reside in the territory or abroad. Customer verification will involve identifying tax residency and collecting pertinent taxpayer identification information. Reportable activities encompass exchanging cryptocurrencies for traditional currencies, swapping different crypto assets, and several transfers.

Businesses must modify customer registration, transaction monitoring, and record-keeping systems. The gathered data will be utilized for annual filings to the Inland Revenue Department, rather than automatically determining individual customer tax obligations. The bill also updates the OECD's Common Reporting Standard, which governs international exchange of financial account information, taking effect in 2028 with first exchanges in 2029, one year after the initial crypto transaction data exchanges.