On March 16, South Korean National Tax Service (NTS) Commissioner Lim Hwan-soo and Wong Kuen-fai, Commissioner of the Inland Revenue Department (IRD) of Hong Kong, met with each other and agreed to share their tax information immediately after their tax treaty becomes effective.
The two countries’ negotiations for the treaty were concluded in September 2013 and the treaty was signed in 2014. Once the National Assembly of South Korea ratifies the treaty, it becomes effective and the two countries can exchange their tax information including financial account information and evidence of tax evasion.
At the meeting, the two commissioners exchanged their opinions about the Common Reporting Standard (CRS) and promised to work closely with each other for it, too. The purpose of the CRS is a regular exchange of the financial account information of residents from the other country after financial institutions’ handover of the information to the tax authorities in one country. At present, 97 countries around the world are participating in the CRS and South Korea and Hong Kong join it in 2017 and 2018, respectively.
“Although Hong Kong is the third-largest foreign investment destination for South Korea and the country where South Korean corporations have the largest number of financial accounts abroad, we could not collect financial and tax information from it because of the lack of legal grounds,” the NTS explained, continuing, “However, the treaty is expected to allow us to get the information we need from now on as we are doing with 115 countries across the world.”