Hong Kong agrees to hand over financial details of Americans working in city to US tax authorities

Hong Kong tax officials will soon be able to pass information about the finances of Americans working in Hong Kong to their US counterparts under an agreement signed yesterday as part of Washington's global crackdown on tax evasion.

The Financial Services and Treasury Bureau said the tax-information exchange agreement allowed the US to file a request to the Inland Revenue Department "under specified conditions".

The bureau said that provided the basis for a further agreement that would enable US tax authorities to seek information directly from local banks.

Tax experts said the agreement was crucial for America's controversial anti-tax evasion law, which takes effect later this year.

The Foreign Account Tax Compliance Act was passed in 2010. It takes effect in July. It requires foreign financial institutions such as banks to declare to the US tax authorities the foreign holdings of anyone liable under US tax rules.

If the institutions did not comply, the US tax authorities would withhold 30 per cent of their US-sourced income, according to Ivan Strunin, managing director of Deloitte's Asia Pacific International Core of Excellence (US Tax Service).

Without an intergovernmental agreement, financial institutions that provided the information might breach privacy laws.