Passage of the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022
ISSUING AUTHORITY:
Legislative Council of the HKSAR
DATE OF GAZETTAL:
December 16, 2022
EFFECTIVE DATE:
June 1, 2023
The Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022 (“the AML Amendment Ordinance”) was gazetted on December 16, 2022 and will come into effect on June 1, 2023, aiming at enhancing Hong Kong's regulatory regime for combating money laundering and terrorist financing.
The AML Amendment Ordinance introduces: (1) a licensing regime for virtual asset service providers; and (2) a two-tier registration regime for dealers in precious metals and stones. The Government of HKSAR has also taken this opportunity to make a number of miscellaneous amendments to ensure alignment with the latest international standards set by the Financial Action Task Force (“FATF”), including without limitation to, amending the definition of a politically exposed person to align with the FATF requirement, supporting the use of technology by clarifying that a recognized digital identification system can be used for the purposes of customer due diligence and satisfying the additional requirements where a customer is not physically present for identification purposes.
Given the corresponding changes to be brought by the AML Amendment Ordinance, supervisory authorities in Hong Kong, such as the Hong Kong Monetary Authority and the Securities and Futures Commission, may soon issue guidance notes on topical issues.
Reference:
Legislative Council of the Hong Kong Special Administrative Region - Bills (legco.gov.hk)
Expansion of the Pilot Scheme on Immigration Facilitation for Visitors Participating in Short-term Activities in Designated Sectors
ISSUING AUTHORITY:
Immigration Department of the HKSAR
EFFECTIVE DATE:
February 1, 2023
Recently on January 31, 2023, the Government of HKSAR announced that commencing on February 1, 2023, the Pilot Scheme on Immigration Facilitation for Visitors Participating in Short-term Activities in Designated Sectors (“Pilot Scheme”) will be expanded to cover two new designated sectors, namely “Finance” and “Development and Construction”, adding to the existing 10 designated sectors; and also, to cover an additional 50 authorised host organizations. The Pilot Scheme aims at welcoming non-local talents to participate in specified short-term activities as visitors up to 14 consecutive calendar days without applying for employment visas or entry permits.
Eligible visitors should be endorsed by the authorised host organisations by way of invitation letters. Eligible visitors are required to strictly adhere to the scope of the specified short-term activities and their roles as specified in the invitation letters. After participating in the designated activity for not more than 14 consecutive calendar days, eligible visitors may continue to stay in Hong Kong for sight-seeing purposes as a visitor until the expiry of their limit of stay (which in turn depends on the type of travel document they hold).
Coupled with the removal of entry restrictions into Hong Kong, it is expected that the Pilot Scheme will bring in more international talents for exchanges in Hong Kong, creating new business opportunities and bolstering Hong Kong’s competitiveness.
Reference:
Inland Revenue Department Issued Administrative Guidance on the New Taxation Regime
ISSUING AUTHORITY:
Inland Revenue Department of the HKSAR
EFFECTIVE DATE:
January 1, 2023
On January 1, 2023, the Inland Revenue (Amendment) (Taxation on Specified Foreign-sourced Income) Ordinance 2022 (“Amendment Ordinance”) came into operation for better combatting cross-border tax avoidance arising from double non-taxation and fulfilling the commitment made by Hong Kong to the European Union in 2021. To provide clarifications on the new taxation regime for foreign source income exemption (“New Regime”), the Inland Revenue Department ("IRD”) has recently issued updates on the administrative guidance for the public.
Some of the clarifications provided by the IRD are:
(1). On Activities of Pure Equity Holding Entities – In the Amendment Ordinance, foreign sourced interest, dividend or disposal gain received in Hong Kong may be exempt from tax under the New Regime if the economic substance requirement is met for the year in which the income accrues. The economic substance requirement can vary depending on whether the entity is a pure equity holding entity. The IRD has clarified that borrowing money for financing its equity investment and earning incidental income (e.g., exchange gains) from such borrowing does not disqualify an entity from being a pure entity holding entity; and
(2). On Outsourcing Arrangements – Some or all of the specified economic activities that an entity is required to perform in Hong Kong to satisfy the economic substance requirement may be outsourced, contracted or delegated to third parties or group entities to perform in Hong Kong. One of the key conditions is that the outsourced activities must be adequately monitored and controlled. For this purpose, the IRD has indicated that, it would be sufficient for a taxpayer to have an internal master service agreement or other proper documentation, provided that the relevant details of the outsourcing agreement (e.g., the identities of the relevant parties, the nature of specified economic activities outsourced, the fees charged, the monitoring mechanism) are set out in the document.
Implementation of the New Regime encourages covered taxpayers to take immediate actions to access the impact that the Amendment Ordinance may have on them, and take appropriate actions, such as notifying the IRD of its chargeability to tax under the New Regime if necessary.
Reference:
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