Hong Kong plans to start collecting relevant cryptocurrency transaction information in 2027 and will begin exchanging it with relevant tax jurisdictions in 2028. Whether residents of Mainland China are included in the first batch for exchange will depend on Hong Kong's publication of the list.

Written by: ChandlerZ, Foresight News

In the future, trading Bitcoin in Hong Kong, exchanging other tokens with USDT, or transferring cryptocurrency assets from exchanges to external wallets may become part of tax information reporting.

On November 4, the Hong Kong Legislative Council passed the “2026 Taxation (Amendment) (Cryptocurrency Reporting Framework and Revised Common Reporting Standard) Bill.” According to the arrangement, the two sets of rules involved in the bill will be implemented in phases: the cryptocurrency reporting framework will take effect on January 1, 2027, and qualified service providers will start collecting information from 2027; Hong Kong plans to exchange information with relevant tax jurisdictions starting in 2028; the revised common reporting standard will come into effect on January 1, 2028, and Hong Kong plans to exchange financial account information according to the new standard starting in 2029.

This arrangement has attracted the attention of many cryptocurrency holders, who needs to report to whom when using Hong Kong exchanges? Will transaction records of Mainland residents be sent back to the Mainland? If one holds Hong Kong identity, does it mean there are no concerns about overseas tax issues?

From the legislative text and the tax bureau's explanation, it is necessary to distinguish three processes: the collection of information by the trading platforms, reporting to the Hong Kong tax bureau, and exchanging information between Hong Kong and other tax jurisdictions. The taxpayer's residency status, the entity operating the exchange, the type of transactions, and the registration list published by Hong Kong will all affect the final outcome.

When will exchanges start collecting information?

This legislation involves two sets of related but different international information exchange rules.

The Common Reporting Standard, abbreviated as CRS, is an automatic exchange standard for financial account tax information established by the Organisation for Economic Co-operation and Development (OECD). Hong Kong has already implemented CRS, requiring banks, some insurance companies, and other financial institutions to identify their clients' tax residency status and report relevant account information to the Hong Kong tax bureau as required. This revision expands the range of applicable digital financial products and adds due diligence and reporting requirements.

The CRS information to be exchanged by the Hong Kong tax bureau includes account numbers, year-end balances or values, as well as total interest, dividends, and proceeds from the sale of financial assets, where applicable. Information related to cryptocurrency trading accounts needs to be assessed based on account types, service provider identity, and the applicability of CARF and revised CRS.

The Cryptocurrency Reporting Framework, abbreviated as CARF, specifically deals with cryptocurrency transaction information. After meeting the relevant conditions, cryptocurrency exchanges, brokers, and other service providers are required to identify users, collect transaction data, and report to tax authorities as required. The tax authority then exchanges this information with relevant jurisdictions based on applicable arrangements.

The first data collection year for CARF is 2027, and existing accounts will also need to supplement their information. According to the original draft, for users who have established a relationship by December 31, 2026, service providers must obtain self-certification by January 1, 2028.

Self-certification refers to users informing the platform of their tax residency status by filling in information such as name, address, tax residency location, and tax identification number. When new users open an account, service providers need to obtain and verify the reasonableness of the certification; existing users may receive supplementary requests when the platform updates customer information.

The tax residency location is determined by the tax laws of the relevant jurisdiction; documents such as passports, ID cards, or account registration locations can provide clues but cannot independently determine the result. If a person is considered a tax resident in two jurisdictions under local laws, the self-certification must truthfully list all applicable jurisdictions and cannot rely solely on the determination rules to select one to avoid double taxation arrangements.

When the bill was passed, the Legislative Council adopted the amendments proposed by the government. KPMG expects the amended regulations to be published in the gazette on November 13, and specific implementations should be based on the gazette text and subsequent guidance from the tax bureau.

Who needs to report, and which transactions will be recorded?

Under CARF, the primary reporting obligation falls on qualified cryptocurrency service providers, including exchanges, brokers, and traders who complete transactions for clients involving cryptocurrency exchanges or fiat currency exchanges, as well as institutions that provide related trading platforms.

Whether service providers need to fulfill obligations in Hong Kong also depends on their connection to Hong Kong. Hong Kong tax residents, entities established in Hong Kong that meet relevant conditions, entities managed from Hong Kong, and service providers with a permanent establishment in Hong Kong may all fall within the scope of the rules. Cross-border platforms must also consider which entity or branch provides their business and other relevant regulations in different jurisdictions; it cannot be determined solely by the name of the app.

According to the original draft, reportable service providers meeting related rules in Hong Kong must register by January 31 of the next calendar year following their first qualification, even if they have no reportable information for that year. For instance, if 2027 is the first year of qualification, the registration deadline would be January 31, 2028.

For users, the most apparent change is that the information that trading platforms need to collect is more detailed. According to the tax bureau's explanation, the identity information of users meeting reportable conditions may include name, address, tax residency location, tax identification number, and date of birth, among others. If the account holder is an entity, in some cases, it may also be necessary to identify the actual controller's identity and tax residency location.

Transaction data is aggregated according to asset and transaction types, involving currency names, total transaction amounts or fair market values, asset quantities, and transaction frequencies. The scope of reporting includes buying cryptocurrency with fiat, selling cryptocurrency for fiat, cryptocurrency-to-cryptocurrency exchanges, and relevant asset transfers handled by service providers.

For example, if a reportable user buys BTC on a platform subject to Hong Kong rules, subsequently exchanges some BTC for ETH, and then transfers the ETH to an external wallet, the fiat purchases, cryptocurrency exchanges, and transfers may all be included in the platform's reporting records. The platform reports categorized summary data as required by the rules, while the specific taxable income still needs to be calculated considering acquisition costs, transaction nature, and applicable tax laws.

The definition of relevant cryptocurrencies includes transferable or tradable homogeneous and heterogeneous tokens; BTC, ETH, and stablecoins used for payment or investment usually fall within the scope of consideration, as do NFTs with investment purposes. Central bank digital currencies and specific electronic currency products that meet legal definitions are excluded from CARF, but certain products may fall under the revised CRS.

It is worth noting that transfers to self-custody wallets may also be recorded; the draft requires service providers to aggregate the quantity and fair market value of outgoing assets for external addresses associated with virtual asset service providers or financial institutions that cannot be confirmed.

The draft also includes a threshold of HKD 390,000 for retail payment transactions that meet specific conditions, including situations where service providers process payments on behalf of merchants. This figure should not be considered a uniform exemption amount for all cryptocurrency transactions; general exchanges and transfers need to be judged according to their applicable rules.

How do residents of Mainland China, Hong Kong, and other regions respectively get affected?

For Mainland China tax residents, it is essential first to look at the final CARF reporting tax jurisdictions list published by the Hong Kong tax bureau and the information exchange arrangements established between Hong Kong and relevant regions. So far, the Hong Kong tax bureau has stated that it will publish the relevant list in due course and has not clarified whether the Mainland will be included as the first batch of CARF reporting and exchange subjects.

Both Mainland China and Hong Kong have participated in financial account information exchange under the traditional CRS, but the participation in traditional CRS does not directly replace the CARF list and exchange arrangements. As of September 14, 2026, the OECD’s updated CARF implementation commitment list shows that Hong Kong is among the regions planned for the first exchange in 2028, while Mainland China is not listed on that commitment list.

However, one cannot conclude from this that residents of the Mainland will never be included in relevant arrangements; there are also other tax information exchange and assistance mechanisms between Hong Kong and the Mainland, and whether specific information can be obtained depends on applicable laws, arrangements, and individual case conditions.

Even if a user's tax residency location has not yet been included in the reporting list, the platform can still conduct due diligence according to the rules to collect information such as tax residency status. The collection of account information by the platform does not equate to the submission of that information to the tax bureau, nor does it mean it has been automatically exchanged with another jurisdiction's tax authority.

For Hong Kong tax residents, if they solely belong to Hong Kong tax residency, it is necessary to look at the location of the platform used and the applicable reporting rules. When using a Hong Kong platform, the platform may still require tax self-certification; if using a platform from other jurisdictions that have implemented CARF, such as the UK, local rules may require the platform to report transactions of local residents or residents of listed regions to the local tax authority. Whether relevant information will be exchanged with Hong Kong also depends on the local list and the bilateral exchange relationship.

For individuals who meet the conditions of both Hong Kong and Mainland tax residents, obtaining a Hong Kong identity card or proof of Hong Kong residency does not automatically eliminate their tax residency status in the Mainland. When the platform requires self-certification, it should truthfully list tax residency locations according to the laws of both places. As for which jurisdiction taxes specific income and how to avoid double taxation, it needs to be evaluated based on the tax arrangements and individual circumstances.

Residents of places such as Singapore, the UK, and the US should also distinguish their respective implementation timelines. The OECD list indicates that the UK plans to first exchange CARF information no later than 2027, Singapore and Hong Kong in 2028, and the US in 2029. These dates represent the commitments made by various places, and do not mean that Hong Kong has established effective exchange relationships with each of these jurisdictions. The UK tax authority's rules also require local service providers to report relevant information of UK residents and residents of the listed jurisdictions.

As of the OECD’s statistics updated on September 14, 2026, a total of 77 tax jurisdictions committed to implementing CARF, among which 46 plan to exchange for the first time no later than 2027, 27 plan to exchange in 2028, and another 4 plan to exchange in 2029. The specific implementation progress and exchange partners in various regions still need to be confirmed individually.

After information is reported, do users have to pay taxes?

CARF specifies the procedures for service providers to collect, report, and exchange information with tax authorities, but does not establish a globally unified tax rate for cryptocurrency assets. Whether a receiving tax authority imposes taxes and how they will calculate it still depends on local tax laws, personal status, and the actual nature of the transactions.

Taking Hong Kong as an example, the tax treatment needs to assess the purpose of holding the asset, the nature of the transaction, and sources of profits. Gains from capital disposals may be treated differently than profits from operating transactions; it cannot be asserted that all trading profits are tax-free simply because one uses a Hong Kong exchange.

If relevant profits are subject to profit tax in Hong Kong, qualifying corporations will face a tax rate of 8.25% on the first HKD 2 million of assessable profits, with amounts exceeding that taxed at 16.5%; qualifying unincorporated businesses, such as sole proprietorships or partnerships, will face a tax rate of 7.5% on the first HKD 2 million of assessable profits, with amounts above that taxed at 15%. Related entities must also meet the conditions for the two-tiered system. These rates apply to assessable profits, and factors such as high-frequency trading, use of leverage, or trading bots also need to be considered along with other facts to determine whether the transaction constitutes a business and its source of profits.

For Mainland tax residents, one cannot simply conclude "the Hong Kong platform reported the transaction amount" to estimate tax liabilities. The total transaction amount does not equal profits; acquisition costs, selling income, method of acquisition, transaction locations, and relevant tax law provisions will all influence precise determination. Cryptocurrency holders, when organizing records, should keep not only platform statements but also records of asset acquisition costs, transfers between different accounts, and related vouchers to avoid misclassifying the transfer of the same batch of assets as new gains.

According to Mainland China's “Individual Income Tax Law”, resident individuals are required to pay taxes on both domestic and foreign income; income from property transfers is subject to a proportionate tax rate of 20%, calculated on the balance of transfer income minus the original value of the property and reasonable expenses. The specific tax item and applicable methods for cryptocurrency transactions need to be determined based on actual circumstances and related provisions, and the 20% rate cannot be directly applied to all cryptocurrency income.

When users submit self-certification, they also need to fill out the information truthfully. According to the original draft and the government consultation document, knowingly or neglecting facts and providing false, misleading, or inaccurate information on important matters in self-certification may result in a conviction leading to a Level 3 fine of up to HKD 10,000. Platforms must fulfill responsibilities related to registration, due diligence, reporting, and record-keeping; non-compliance may face criminal or administrative penalties.

Next, the Hong Kong tax bureau needs to publish the list of CARF reporting tax jurisdictions and partner tax jurisdictions, as well as the reporting system and enforcement guidelines. For platform users, the due diligence requirements applicable from 2027 onward and the list published thereafter will determine what supplementary information is needed and which transaction data needs to be reported.