In an advocacy document released on Monday, the HKSFPA shared its dissatisfaction with certain aspects of the proposal, saying some laws could create operational constraints and pose legal risks to market participants.
The Hong Kong Securities and Futures Professional Association said it generally supported the city’s CARF law, but urged authorities to be flexible on record-keeping requirements. That association is respond Amendments made to the Organization for Economic Co-operation and Development’s Crypto Asset Reporting Framework (CARF).
calfAccording to the OECD, it was proposed in December 2024 and would give the go-ahead for the cross-border exchange of crypto asset holders’ tax information in China’s special administrative regions by 2028.
HKSFPA slams record management rules for dissolved companies
According to the association’s response, the HKSFPA supports the proposed six-year record retention period, in line with existing Inland Revenue and CRS standards. But the group said it was concerned about the extension of record-keeping requirements for dissolved entities.
“While we generally agree with the six-year retention period in line with existing inland revenue and CRS standards, we have concerns about the obligations placed on individuals following dissolution.”
Placing record-keeping responsibilities on directors and key officers after a company’s operations have officially closed could expose them to indefinite liability and impede compliance, the association said.
It is advising the government to cut off former staffers’ access to law firms that store, fund, or are authorized to store customer data. Citing issues raised by PwC and the Financial Services Treasury, the group proposed appointing an independent third-party custodian, such as a liquidator or authorized corporate services provider, to take over record-keeping duties.
Seek proportional registration requirements
When asked about the obligation to register with the RCASP reporting relationship; Hong KongThe HKSFPA said it will help ensure fair competition and prevent compliant companies from being compromised by unregulated operators.
It acknowledged that mandatory registration would help the Internal Revenue Service identify the entire population of RCASPs operating in or associated with the city. Still, one-size-fits-all laws could go too far for “zero profit” companies.
“We recommend expedited registration or a simplified annual filing process for RCASPs that anticipate unfiled filings to reduce administrative costs while meeting IRD oversight requirements,” HKSFPA wrote.
The group also noted that many private investment entities fall into this category and could face unnecessary layers of management under the current proposal. It is suggested that entities that are registered with CARF or hold a business registration number should be able to activate their CRS registration through a simple selection of portals.
Regarding penalties for companies that violate the law, the HKSFPA agreed that administrative penalties are the best alternative to criminal prosecution. Business rights advocates say this could help solve non-compliance problems and reduce legal costs for regulators and the industry.
However, it cautioned against applying a “per account” fine of “$1,000 per account/user” as in the UK. rule. The association warned that this could result in unfair fines, saying even if there was no intent to evade taxes, a single software issue could result in a fine.
“If RFI has conducted standard due diligence, a reasonable excuse defense can be clearly codified in cases where RFI relied on a valid self-certification that later turns out to be false,” the group said.
Recommended electronic filing system for CARF submissions
In response to a question about the filing system that crypto service providers should use for CARF, the association was positive about electronic filing, but encouraged governments to move away from manual uploads.
Moving away from manual submissions, suggestions included application programming interfaces and XML files, especially for large institutions with complex systems. A direct connection to the API automates the reporting process, reduces filing errors, and improves data consistency.
The company said manual uploads through online portals reduce efficiency for companies managing large transaction volumes. Both options are fully supported and detailed XML specifications and test environments must be available at least one year before system go-live, the company said.
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