Hong Kong: crypto platforms will have to report transactions to the tax authorities

The law adopts the OECD framework on crypto-asset reporting (CARF), published in October 2022. It aims to identify transactions that might otherwise escape taxation. The rules will apply in 2027, and the first exchanges of information between tax authorities will begin in 2028.

The platforms and brokers concerned will have to record their clients' name, address, tax residence and identification numbers. They will also have to keep the history of purchases, sales and transfers.

According to the source, the transactions covered are the purchase and sale of cryptocurrencies, the exchange of one token for another and the sending of funds to external wallets.

Hong Kong's tax authority, the Inland Revenue Department, will transmit clients' identity data and annual transaction totals to the authorities of the participating jurisdictions where those clients are tax resident.

A person who holds crypto-assets with a platform operating in Hong Kong will have their tax residence documented, and their data will then be transmitted to the country where they are tax resident, provided that country participates in the exchange. The source does not list these jurisdictions.

Hong Kong has already been exchanging information on financial accounts with foreign authorities since 2018, under the OECD's Common Reporting Standard. Amendments will extend this system to more digital financial products from 2028, with exchanges from 2029.

The text does not detail the penalties for non-compliance, any thresholds, or the exact date of entry into force in 2027. It states only that the authority will publish guidance and provide technical support to businesses so they can comply with the rules.