Last year, Mr. Zhang from Shenzhen opened a company in Hong Kong and, while he was at it, deposited over 800,000 U.S. dollars into an HSBC account. This year, he received an email from the bank asking him to complete a “Self-Certification Form for Tax Residency Status,” and only then did he realize that the money in his Hong Kong account was going to be reported back to the mainland.

This is the CRS. It’s not as high-profile as a tax audit, but its scope is expanding. Recently, many clients have been asking: Has the CRS been updated again? Which accounts will be subject to information exchange? Today’s post will explain it all.

01

What Exactly Is CRS?

CRS stands for Common Reporting Standard. Simply put, it refers to the exchange of financial account information regarding non-residents among tax authorities of different countries.

If you open an account in Country A but are a tax resident of Country B, the bank in Country A will periodically report information such as your account balance, interest, dividends, and gains from the sale of financial assets to the tax authorities in Country B.

China began its first international data exchange in September 2018. That year, the first batch of participating countries included 61, such as Hong Kong, Singapore, Switzerland, Luxembourg, the Cayman Islands, and the British Virgin Islands (BVI)—all popular offshore jurisdictions.

Many people mistakenly believe that the CRS only targets “wealthy individuals.” In fact, this is not the case. As long as the account holder is a “non-resident” and the account balance exceeds a certain threshold, the information may be exchanged. The threshold for individual account balances is generally $250,000, but it is lower in some countries.

More importantly, the CRS does not exchange information on “individual transactions,” but rather annual account snapshots. Balances, interest, dividends, and capital gains—it covers them all.

02

What are the improvements this year?

In March 2026, the Hong Kong Legislative Council gazetted the “Taxation (Amendment) (Automatic Exchange of Information) Bill 2026,” which the market has dubbed a precursor to “CRS 2.0.”

This revision includes several key changes. First, the scope of reporting entities has been expanded. In addition to banks, securities firms, and insurance companies, certain trust companies, private equity funds, and digital asset custodians have also been included in the reporting requirements.

Second, due diligence must be strengthened. Banks must verify a wider range of information when opening accounts, including the actual controller, beneficial owner, and the company’s ownership structure. The scope for hiding one’s identity through “nominee holdings” or “multi-tiered structures,” as was common in the past, is becoming increasingly limited.

Third is the timeline for implementing the CARF framework. CARF is a cryptocurrency reporting framework; Hong Kong plans to begin collecting data in 2028 and conduct the first exchange in 2029. This means that cryptocurrency accounts will also be included in future exchanges.

Fourth, penalties have been increased. The Hong Kong Inland Revenue Department has raised the maximum fines for financial institutions that refuse to file returns or submit false returns, and may launch criminal investigations.

Many people ask: Does this only affect Hong Kong? No. Regulations are being tightened simultaneously around the world. Offshore centers such as the British Virgin Islands (BVI), the Cayman Islands, and Jersey have already implemented stricter CRS due diligence rules effective January 1, 2026.

03

Will your account be swapped?

There is only one criterion: whether your tax residency status in the jurisdiction where you opened the account differs from that of the jurisdiction where the account is located.

If you are a tax resident of mainland China and open an account in Hong Kong, the Hong Kong bank will report your information to the Chinese tax authorities. Conversely, if you are already a tax resident of Hong Kong and open an account in mainland China, the mainland bank will also report your information to Hong Kong.

Frequently Asked Question 1: Now that I have Hong Kong residency, am I exempt from the CRS?

Not necessarily. The CRS focuses on “tax residency,” not “identity.” If you have obtained Hong Kong residency but still primarily live and work in mainland China, the mainland tax authorities may still consider you a Chinese tax resident. Dual residency status must be determined according to the “pro rata rule.”

Frequently Asked Question 2: Will both corporate and personal accounts be exchanged?

Yes, they do. However, the company account will be traced back to the actual controller. If you hold the account through a Hong Kong company, the bank will require disclosure of the ultimate beneficial owner.

Frequently Asked Question 3: Since the U.S. is not a CRS member, is it safe to open a U.S. bank account?

The United States has its own FATCA, which predates CRS and is more stringent. When Chinese tax residents open accounts in the United States, the information is exchanged back to China through FATCA. Therefore, the notion of a “U.S. tax haven” does not exist.

Frequently Asked Question 4: Will you not exchange if my account balance is low?

Active due diligence is generally triggered only for individual accounts with balances of $250,000 or more, but there is no threshold for new accounts; all new non-resident accounts are subject to identification. Furthermore, $250,000 is a “balance threshold,” not an “absolute safety threshold.”

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04

How to Ensure Steady Compliance

First, accurately declare your tax residency status. Do not provide false information when opening an account. Hong Kong banks are now conducting very strict checks; if you indicate “Mainland China,” you will be treated as a Chinese tax resident, and the information will be exchanged back. If you are indeed a Hong Kong tax resident, you must provide sufficient supporting documentation.

Second, review overseas accounts and corporate structures. In particular, for assets held through companies in the BVI, the Cayman Islands, or Hong Kong, verify whether the disclosure of beneficial owners is complete and whether such entities have been designated as “passive non-financial institutions.”

Third, distinguish between “compliant holdings” and “hidden income.” The CRS itself does not impose taxes; it is merely a mechanism for the exchange of information. However, the information exchanged may prompt further scrutiny from tax authorities. If the source of the account funds is legitimate and your tax returns are complete, there is no need to panic.

Fourth, pay attention to family trusts and insurance. The disclosure rules for certain insurance trusts and offshore trusts are relatively complex; it is recommended to assess the impact of the CRS before establishing them.

Fifth, maintain a complete chain of evidence. Documents such as account opening forms, proof of funds, tax return records, and records of days spent in the country should all be systematically filed. This ensures you can respond promptly should the tax authorities make an inquiry.

05

summarize

The CRS has entered its second phase of implementation. The draft amendments in Hong Kong, the tightening of due diligence requirements for offshore centers, and the countdown to the CARF framework all point to one thing: transparency regarding overseas financial accounts will only continue to increase.

For the average person, the most important thing is to determine their tax residency status and ensure that their overseas accounts and income have been reported in compliance with the law. For business owners who hold Hong Kong companies, offshore structures, or overseas assets, now is a critical time to review their structures and complete any missing documentation.

Compliance isn't about hiding; it's about giving yourself peace of mind.

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