Hong Kong strengthens tax transparency for crypto assets to combat cross-border tax evasion

Hong Kong is preparing to implement an ambitious legislative framework to combat tax evasion in the digital asset sector. This initiative, led by the Financial Services and Treasury Bureau, aligns with a global trend toward increased transparency and international tax cooperation, especially in response to issues posed by cryptocurrency transactions.

An reporting framework aligned with OECD international standards

According to official announcements reported by Odaily, Christopher Hui, Secretary for Financial Services and the Treasury, and Joseph Chan, Under Secretary, will soon present the details of this policy during an informational session before the Legislative Council’s Financial Services Panel. The prepared documents reveal that Hong Kong plans to submit legislative proposals to the Legislative Council within the year, aiming to establish a cryptocurrency asset reporting system compliant with the reporting standards developed by the Organisation for Economic Co-operation and Development (OECD).

This approach, harmonized with international standards, will enable Hong Kong to integrate more closely into the global tax compliance network, thereby strengthening its reputation as a responsible and regulated financial center.

Automation of information exchange starting in 2028

The main goal of the proposed framework is to establish an automatic exchange system for tax information related to cryptocurrency transactions between Hong Kong and other tax jurisdictions. This mechanism will come into effect in 2028, providing unprecedented visibility into cross-border digital financial flows.

Automating this information exchange marks a significant shift in how global tax authorities approach regulation of digital assets, allowing for faster detection of anomalies and suspicious behaviors.

Implications for combating international tax evasion

This legislation represents a decisive step in preventing tax evasion worldwide. By enabling Hong Kong authorities and their international partners to automatically share data related to cryptocurrency transactions, the system aims to close gaps that have long allowed tax evaders to exploit informational asymmetries between jurisdictions.

Enhancing the tax transparency of crypto assets fits into a broader effort to fight cross-border tax evasion, a strategic issue for developed economies facing revenue volatility. Public consultations on the legislative proposals are currently underway, offering sector stakeholders an opportunity to contribute to shaping this important policy.