Further to the consultation paper issued by the HKSAR Government in December 2025 on the implementation of the new Crypto-Asset Reporting Framework (CARF) and related amendments to the CRS¹, the Inland Revenue (Amendment) (Automatic Exchange of Information) Bill 2026² (the Bill) was gazetted in March 2026.  The Bill seeks to strengthen the existing administrative framework for the CRS regime in Hong Kong to address the OECD’s concerns identified during the peer review process.

The Bill was introduced into the Legislative Council on 1 April 2026. Upon the enactment of the Bill, the strengthened administrative measures will be effective from 1 January 2027.

Under the current CRS framework, only reportable financial institutions (RFIs) that maintain reportable accounts are required to register in the AEOI portal and notify the Inland Revenue Department (IRD) to fulfill their reporting obligations.

Under the strengthened administrative framework, all RFIs in Hong Kong will be required to register in the AEOI portal, regardless of whether they have any information to report to the IRD. This registration requirement will however not apply to an RFI if the relevant data, including a nil reporting, is reported by another RFI. This mandatary registration is more targeted at CRS RFIs without reportable financial accounts.  They are currently not required to register on the AEOI portal and perform nil CRS filing. If the FO is not a RFI under CRS, they are not required to do CRS registration and filing.  Generally speaking, the financial account of the FO should be reported by other financial institutions, e.g. bank or custodial entities.

In response to the feedback received in the public consultation, the government has extended the initial registration deadline for existing RFIs from 31 January 2027 to 31 March 2027.  For a financial institution (FI) becoming a RFI on or after 1 January 2027, they are required to register in the AEOI portal by 31 January of the year following the calendar year in which the FI first becomes an RFI. 

RFIs are currently required to (1) keep due diligence records for a period of six years from the date on which the due diligence procedures are completed and (2) retain the information for ascertaining the correctness and accuracy of the CRS returns for a period of six years after the CRS returns are filed.

The Bill proposes to revise the record-keeping requirements as follows:

• RFIs are required to keep (1) due diligence records and (2) information for ascertaining the correctness and accuracy of the CRS returns for a period of six years from the last day of the relevant reporting period or the CRS return due date, whichever is the later.
• An entity that has ceased to be an RFI but has not been dissolved will still be subject to the updated record- keeping requirements. The entity is also required to inform the IRD within one month of its cessation or any change of contact details following such cessation.
• Any person who is a director (or a trustee or person who was responsible for the management, if there was no director) of the RFI immediately before its dissolution is required to ensure that sufficient records of the RFI are kept until the end of the above six-year record-keeping period. These persons will also be required to inform IRD within one month of the dissolution or any change of contact details following such dissolution.

The Bill introduces new penalty provisions and amendments to the existing penalties related to RFIs’ non-compliance and wrongdoings.  Please refer to Annex B of the Legislative Council Brief³ for a comparison of the existing penalties and the proposed measures. Examples of the newly introduced penalty provisions are imposition of fines for committing the following offences without reasonable excuse, (i) failure to register an account in the AEOI Portal, (ii) providing incorrect or incomplete information when furnishing returns, statements or information, and (iii) failure to notify the IRD of cessation of being an RFI or dissolution of RFI within the specified timeframe.

Separately, the Bill proposes to put in place an “administrative penalty” mechanism for RFI’s non-compliance without reasonable excuse, which is modelled from the “additional tax” mechanism under the profits tax regime.  RFIs which have committed certain offences without reasonable excuse can be liable to an administrative penalty provided that no prosecution has been initiated for the same facts. For example, if an RFI discovers in the CRS return, certain information is inaccurate and without reasonable excuse fails to notify the IRD within a reasonable time, the RFI could be subject to a fine either at the higher of level 3 (HK$10,000), or a fine of HK$1,000 multiplied by the number of impacted financial accounts.

The draft legislation introducing strengthened CRS administrative measures marks the IRD’s initial move toward adopting the latest compliance standards for AEOI regimes, including CARF and CRS 2.0, as detailed in the recent consultation paper. With these changes set to take effect from 1 January 2027, RFIs are encouraged to proactively assess any potential gaps in their current processes compared to the proposed CRS requirements. In particular, financial groups should review their Hong Kong-based RFIs that do not currently maintain CRS reportable accounts to determine whether these entities need to complete mandatory CRS registration on the AEOI portal before March 2027. This will also trigger annual nil CRS filing obligations for the RFIs without CRS reportable accounts once they are registered on the AEOI portal. The revised record-keeping obligations and the updated penalty framework (under which the fine amounts will be linked to the number of financial accounts involved for certain offences) are expected to have operational consequences for RFIs.

Looking ahead, financial sector participants should begin preparing for the rollout of CARF and CRS 2.0 under further legislative amendments, which will come into force on 1 January 2027 and 1 January 2028, respectively. Hong Kong Government will release further legislative amendments on CARF and CRS 2.0 in the near future, including the enhanced due diligence procedures and additional reporting fields under CRS 2.0. These developments will bring notable changes to the operational environment for both financial institutions and registered crypto-asset service providers in Hong Kong, impacting areas such as account onboarding, due diligence processes, and data management for reporting purpose. Entities are advised to stay informed about regulatory updates, evaluate their existing compliance structures, and take early action to ensure a seamless transition to the new tax transparency requirements.

If you have any questions or require assistance regarding the above content, please feel free to contact us via taxservicesenquiry@kpmg.com.

1.  For more details, please refer to our previously issued Hong Kong SAR Tax Alert - Issue 2, January 2026

2.  The Bill can be accessed via this link: https://www.legco.gov.hk/yr2026/english/bills/b202603271.pdf

3. The Legislative Council Brief can be accessed via this link: https://www.legco.gov.hk/yr2026/english/brief/tsybr200800330c_20260325-e.pdf