In 2014, OECD passed IRS (common reporting standards) to facilitate tax information exchange sharing to prevent double taxation. Because of the dangers associated with tax avoidance such as the 2007-2008 Global Economic Recession, many jurisdictions have agreed to implement the IRS framework. In Hong Kong, a local IRS framework was passed in 2016 to provide a framework for exchanging financial information for non-residents. The reporting institutions are required to carry due diligence on all existing Hong Kong bank accounts and those that are being opened.
Therefore, when you are preparing to open a bank account in Hong Kong, it is important to prepare for due diligence using the following methods.
Be extra careful when selecting an offshore bank
The first step when preparing for due diligence is picking the bank of choice carefully. You want to pick a Hong Kong bank that accepts offshore accounts.
You also want to pick a bank that has higher interest rates and great customer services. Make sure to also check the bank’s mobile applications, online banking, transfer charges, and monthly fees for assurance that your deposits will be safe.
Preparation when opening personal offshore account
According to the Hong Kong IRS framework passed in 2016, banks are required to gather additional information about their clients. Many banks will require you to provide additional information on proof of residence. While the banks were previously satisfied with the post office address, it is different now.
You must provide proof of address with a utility bill and even digitally. For example, you might be required to point where your home is located using Google Maps and other technologies. The banks do not want to leave anything to chance.
Personal bank-to-customer relationship
The banks are no longer simply interested in getting a longer list of clients they do not know. Rather, they want to know and understand you. Therefore, they ask more questions about to support the source of income. This means that you have to travel all the way to Hong Kong when opening a bank account. Even for those that agree to open a bank account remotely, the account holder must travel to Hong Kong and visit the bank for authentication.
Opening a corporate bank account
Unlike a personal bank account, the corporate offshore bank account requires more information to get allowed to operate. You must provide comprehensive details of all the shareholders including their tax numbers from back home. Besides, the company must demonstrate the main target clients, current assets, and methods it plans to utilize for mobilizing additional resources.
If your business has some clients from countries not allowed to enter Hong Kong or involved in fraud, the bank will decline the application. Make sure to have copies of past invoices, the tenders you have won, and contacts of past clients to demonstrate that the company is not involved in tax evasion, fraud, or terrorism.