Traditionally, business owners and investors have tended to diversify wealth and investments outside of their home jurisdictions, and the use of holding structures, with offshore companies, offshore accounts and/or trusts, or a combination thereof, is relatively common place, across many jurisdictions and has been existing for a long time. It is usual to involve handing over legal ownership and responsibility for the assets and delegating control or investments to a third party trustee. The reasons for setting up a trust varies but with growing global wealth, there continues to be ever-growing needs for such arrangements for maintaining and protecting wealth for future generations, and as succession planning. In a wealth management centre like Hong Kong, for instance, we continually see increasing demands for trust set-up among high-net-worth individuals and families in China and the rest of Asia, amongst others.
Meantime, the Organisation for Economic Cooperation and Development (“OECD”) has in recent years doubled up efforts of (non-US) tax authorities globally towards chasing taxpayers who are flying under the radar of their home countries’ tax authorities and who do not declare their income or gains arising from assets or investments held overseas. As a responsible member of the international community and in keeping up its international reputation and competitiveness as an international financial centre, Hong Kong has also adopted automatic exchange of information between tax authorities, moving from its previous position of providing information only upon request.
In this synopsis, we provide an outline of the global changes that have driven the enhancement of tax transparency – more specifically, the international standard on automatic exchange of financial account information in tax matters, which has now been implemented by many jurisdictions globally including Hong Kong and China.
