Bilateral Agreement between the US and Hong Kong to ...

1 1 Agreement between t he Government of the United S tates of America a nd the Government of the hong kong Special Administrative Region of the People s Republic of China for Cooperat ion to Facilitate t he I mplementation of FATCA Whe reas, the Government of the United States of America (the United States ) and the Government of the hong kong Special Administrative Region of the People s Republic of China ( HKSAR ) (each, a Party, and together, the Parties ) seek to build on the ir existing relationship with respect t o mutua l a ssistance in tax matters and desire to conclude an Agreement to impr ove their c ooperation in combating international t ax eva sion.

2 Whe reas, Article 5 of the Agreement between the Government of the United Stat es of America and the Government of the hong kong Special Administrative Region of the People s Republic of China for the Exchange of Information Relating to Taxes (the TIEA ), done at hong kong on March 25, 2014 , a uthorizes the excha nge of infor mation for t ax purposes upon request; Whe reas, the United States of America enacted provisions commonly known as the Foreign Account Tax Compliance Act ( FATCA ), which introduce a reporting regime f or f inanc ial institutions with respect t o certain accounts; Whe reas, FATCA ha s r aised a number o f issues, including that HKSAR financ ial institutions may not be able to comply with certain aspects of FATCA due t o or in relation to any possible or potential impe diments.

3 Whe reas, intergovernmental cooperation to facilitate FATCA implement ation would address these issue s and r educe b ur de ns for HKSAR financial institutions; Whe reas, the Parties desire to conclude an Agreement to provide for c ooperation to facilitate the implementation of F ATCA ba sed on direct repor ting by HKSAR financ ial institutions to the Interna l Reve nue S ervice, s upplemented by the exchange of information upon request pursuant to the TIEA, and subject to the conf identiality and other protections provided for therein, inc luding the provisions limiting the use of the information excha nged under the TIEA.

4 Now, therefore, the Parties have agreed as follows: Article 1 Definitions 1. For purposes of this Agreement and any annexes thereto ( Agreement ), the following terms sha ll have the meanings set for th below: a) The te rm United S tates means the United States of America, including the Stat es thereof , but does not inc lude the Territor ies. Any reference to a State o f the United States includes the District of Columbia. b) The te rm Territory means American Samoa , the Commonwealth of the Northern Mariana Islands, Guam, the Commonwealth of Puerto Rico, or the Virgin Islands.

5 2 c) The te rm IRS means the Interna l Revenue S ervice. d) The te rm the HKSAR means the hong kong Special Administrative Region of the People s Republic of China. e) The te rm Partner Jurisdiction means a jurisdiction that has in effect an Agreement with the United Stat es to facilitate the implementation of FATCA. The IRS shall publish a list identifying all Partner J ur isdictions. f) The te rm Competent Authority means: 1) in the case of the United Stat es, the Secretary of the Treasury or his de legate; and 2) in the case of the HKSAR, the Secretary for Financial Services and the Treasury or an authority designated by him.

6 G) The te rm Financial I nstitution means a Custodial Institution, a Depositor y Institution, an Investment Entity, or a Specified Insuranc e Company. h) The te rm Foreign R eportable Amount means, in accordanc e with relevant Treasury Regulations, a p ayment of fixed or determina ble annual or pe riodical income that would be a withholda ble payment if it were f rom sources within the United Stat es. i) The te rm Custodial Institution means any Entity that holds, as a substantial portion of its business, financ ial assets for the a ccount of others.

7 An entity holds financial assets for the account of others as a substantial portion of i ts business if the entity s gross inc ome attributable to the holding of financ ial assets and related financial services equals or exceeds 20 percent of the entity s gross income during the shorter of: (i) the three-year period that ends on December 31 (or t he f inal day of a non-calendar year accounting period) prior to the year in which the determina tion is being made ; or (ii) the period during which the entity has been in existence. j) The te rm Depository Insti tution means any E ntity that accepts deposits in the ordina ry course of a ba nking or similar business.

8 K) The te rm Inve stment Entity means any Entity that conducts as a business (or is mana ged by an entity that conducts as a busine ss) one or more of the following a ctivities or operations for or on beha lf of a c ustomer: 1) trading in money market instruments (che ques, bills, certificates of deposit, derivatives, etc.); foreign excha nge; exchange, interest rate and index instruments; tr ansferable securities; or commodity futures trading; 2) individual and collective portfolio management; or 3) otherwise investing, administering, or managing funds or money on be ha lf of other persons.

9 This subparagraph 1( k) s ha ll be interpreted in a manner consistent with similar language set forth in the definition of financ ial i nstitution in the Financial 3 Action Task Force Recommendations. l) The te rm Specified Insurance C ompany means any Entity that is an insuranc e c ompany (or t he holding company of an insuranc e c ompany) that issue s, or is obligated to make payments with respect to, a C ash Value Insuranc e Contract or an Annuity Contract. m) The te rm HKSAR Financial I nsti tution means (i) any Financial Institution resident in the HKSAR, but excluding any branch of s uch Financial Institution tha t i s located outside the HKSAR, a nd (ii) any branc h of a Financial Institution not resident in the HKSAR, if such branc h is located in the HKSAR.

10 N) The te rm Partner Jurisdiction F inancial I nsti tution means (i) any Financial Institution established in a P artner J ur isdiction, but e xcluding any branc h of such Financial Institution tha t is located outside the Partner J ur isdiction, and (ii) any branch of a F inanc ial Institution not established in the Partner J ur isdiction, if such branc h is located in the P artner J ur isdiction. o) The te rm Repor ting HKSAR Financial I nsti tution means any HKSAR Financial Institution tha t i s not a Non- Reporting HKSAR Financial Institution.