2025 Issue 2 Volume 21 DRIVING BUSINESS SUCCESS RESTRUCTURING AND INSOLVENCY The complexities and appeal of cross-border R&I work BEPS 2.0 JOURNEY How the world, including Hong Kong, has been navigating the BEPS project SECOND OPINIONS What role should accountants play in assessing and disclosing nature-related financial risks? PLUS: Benjamin Chan, Commissioner of Inland Revenue, shares his answers amid a fast-changing tax landscape, and what it takes to be a future-ready tax expert HOW CAN HONG KONG’S TAX SYSTEM STAY COMPETITIVE?
PRESIDENT’S MESSAGE APLUS DEAR MEMBERS 2025 Issue 2 1 Edward Au, President “ Each achievement reflects our commitment to the three strategic themes of the Strategic Plan 2025: ‘Building Trust,’ ‘Nurturing Talent,’ and ‘Driving Development and Transformation’.” I am thrilled to share a series of impactful updates and milestones achieved by the Hong Kong Institute of CPAs that underscore our unwavering dedication to advancing the accounting profession and championing Hong Kong’s economic growth. Each achievement reflects our commitment to the three strategic themes of the Strategic Plan 2025: “Building Trust,” “Nurturing Talent,” and “Driving Development and Transformation.” In early April, I had the privilege of hosting a dynamic luncheon with leading international and local media representatives. During the event, I unveiled the key focus areas of our Strategic Plan 2025. I also highlighted our initiatives to promote sustainability, enhance our international presence, and drive digital transformation across the accounting sector. By sharing our vision and achievements, we aim to reinforce public confidence in the integrity and value of the accounting profession. One such initiative is a new public affairs professional development series. The inaugural event, Sharing on the Two Sessions 2025, had over 300 participants joining this thought-provoking discussion. Esteemed members shared valuable insights into the implications of the Two Sessions for Hong Kong and the accounting profession. This dialogue showcased the Institute’s dedication to guiding members in understanding and aligning with national priorities. In another showcase of our commitment to building public trust, I had the honour to speak on the panel titled “The importance of ISSB Standards for Global Sustainability Reporting” at Earth Forum 2025 in mid-April. During the discussion, I underscored how ISSB Standards can lay the groundwork for mandatory reporting with assurance, and shared insights on the Institute’s publication of the HKFRS Sustainability Disclosure Standards last December, our ongoing efforts in capacity building, and addressing key comments raised by stakeholders to facilitate the application of these standards. In February, we welcomed the government’s inclusion of accounting talent in the updated “Talent List,” effective 1 March 2025. This recognition – advocated by the Institute – addresses critical talent gaps and ensures high-quality accounting services in Hong Kong. Complementing this, the government’s expansion of the Top Talent Pass Scheme will further attract global talent, a vital step toward strengthening the profession’s future. Our commitment to talent engagement was evident in April when I led a delegation to the Guangdong-Hong Kong-Macao Greater Bay Area Talent Development Showcase in Kuala Lumpur, Malaysia. This event, organized by Hong Kong Talent Engage, facilitated meaningful exchanges with Malaysian counterparts and strengthened ties with top talent in the region, advancing Hong Kong’s reputation as a hub for professional excellence. The Institute remains steadfast in cultivating the next generation of accounting professionals. We were excited to introduce Computer-Based Examinations for the Qualification Programme (QP) in collaboration with the Hong Kong Examinations and Assessment Authority. This innovation delivers a smarter, greener, and more efficient assessment experience, aligning with our vision of modernizing professional development. Starting this year, we will begin awarding certificates to students who complete certain QP modules to acknowledge their progress. This will encourage continuous learning, and motivate them to complete the QP to obtain their CPA qualification. Individuals from other industries and various positions can also earn this certificate to validate their practical accounting and business knowledge. Stay tuned as we announce new updates. To support Mainland Chinese enterprises in their global expansion, the Institute launched the List of accounting firms helping Mainland enterprises go global. This comprehensive resource, featuring over 80 Hong Kong accounting firms, highlights their expertise, international experience, and target markets. By connecting Mainland enterprises with Hong Kong’s world-class accounting services, we are fostering cross-border growth and reaffirming Hong Kong’s position as a leading professional services hub. We also applauded the 2025-26 Budget, which embraced several of our recommendations, including measures to promote green finance, support technological innovation, and advance the megaevent economy to enhance Hong Kong’s global brand. These initiatives align closely with our mission to drive economic transformation while maintaining high standards of fiscal responsibility. Thank you for your ongoing support. I look forward to sharing more exciting updates with you in the future.
CONTENTS 2025 Issue 2 NEWS 01 President’s message 04 Institute news 07 Business news FEATURES 08 Keeping it simple and effective: The IRD's balancing act Benjamin Chan, Commissioner of Inland Revenue, on driving a digital revolution at the IRD and his advice for tax specialists 14 The evolving landscape of cross-border restructuring and insolvency Experts explore keys trends shaping cross-border restructuring and insolvency 22 BEPS 2.0: The journey of global tax reform Two timelines reflect how BEPS 2.0 rules dramatically change the international tax landscape, as well as Hong Kong’s journey as part of the global effort to address BEPS SHORT PROFILES 30 Q&A with a PAIB Peisi Deng, Wealth Advisor at investment platform StashAway Hong Kong 31 Q&A with a PAIP Janet Tsang, Executive Director, Audit and Assurance, Head of Clients Accounting, at Baker Tilly Hong Kong 40 Young member of the month Anson Chan, Head of Financial Intelligence Unit of Financial Crime Prevention at UBS AG Hong Kong COLUMNS 27 Thought leadership: Eugene Yeung The Chair of the Institute’s Taxation Faculty Executive Committee, and Partner of KPMG on strategies to address the Hong Kong government’s deficit 28 Second opinions What role should accountants play in assessing and disclosing nature-related financial risks? A look at how the world, including Hong Kong, has been navigating the BEPS project, the progress so far, and key successes of these international efforts 30 Q&A with a PAIB 31 Q&A with a PAIP 22 BEPS 2.0: The journey of global tax reform
DRIVING BUSINESS SUCCESS About our name A Plus stands for Accounting Plus. It represents a profession that is rich in career options, stays relevant amid rapid changes, and adds value to business. This magazine strives to present the global mindset and varied expertise of Institute members – Accountants Plus. Editor Gerry Ho Email: gerry.ho@mandl.asia Managing Editor Jemelyn Yadao Contributor Jolene Otremba Registered Office 2/F Wang Kee Building, 252 Hennessy Road, Wanchai, Hong Kong Advertising enquiries Advertising Director Derek Tsang Email: derektsang@mandl.asia ISSN 1815-3380 President Edward Au Vice Presidents Stephen Law Jasmine Lee Chief Executive and Registrar Margaret W. S. Chan Director of Corporate Communications Rebecca Tam Publication Manager Michael Wong Editorial Coordinator Maggie Tam Office Address 37/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong Tel: (852) 2287-7228 Fax: (852) 2865-6603 Member and Student Services Counter 27/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong Website: www.hkicpa.org.hk Email: hkicpa@hkicpa.org.hk 42 Institute insights: Guiding the transformation of Hong Kong’s accounting profession: The Institute’s Strategic Plan 2025 How the key focuses of this year’s Strategic Plan will push accountants towards continuous development at a time of economic uncertainties SOURCE 32 A new milestone in sustainability assurance A n overview of HKSSA 5000 33 Improving the equity method of accounting A summary of the Institute’s response to the IASB Exposure Draft Equity Method of Accounting – IAS 28 Investments in Associates and Joint Ventures (revised 202x) 40Young member of the month A Plus is the official magazine of the Hong Kong Institute of Certified Public Accountants. The Institute retains copyright in all material published in the magazine. No part of this magazine may be reproduced without the permission of the Institute. The views expressed in the magazine are not necessarily shared by the Institute or the publisher. The Institute, the publisher and authors accept no responsibilities for loss resulting from any person acting, or refraining from acting, because of views expressed or advertisements appearing in the magazine. © Hong Kong Institute of Certified Public Accountants 2025 Issue 2. The digital version is distributed to over 47,000 members, and around 12,000 students of the Institute and over 2,000 business stakeholders every quarterly. The evolving landscape of cross-border restructuring and insolvency As the R&I landscape continues to evolve, experts in the field call for creativity, adaptability, and collaboration 34 Amendments to HKFRS 9 and HKFRS 7 on the classification and measurement of financial instruments Key implications of the amendments that may be relevant and have a wider impact on reporting entities in Hong Kong 38 Technical news 14
The Institute released Strategic Plan 2025, a forward-looking blueprint for excellence and innovation in the accounting profession in March. Crafted through extensive collaboration within the Council, three strategic themes have been identified, namely: Building Trust, Nurturing Talent, and Driving Development and Transformation. Twelve key focus areas have also been highlighted, under which a number of key actions have been defined to contribute to the goal of addressing and achieving the aims of the strategic themes. This flexible approach allows the Institute to adapt its initiatives based on the unique demands of each year while remaining committed to the sustainable development of the profession and Hong Kong as a global financial hub. Visit the designated website to explore the full details of the plan. Institute’s response to 2025-26 Budget The government’s 2025-2026 Budget included a number of measures in line with proposals by the Institute in its budget submission, including introducing a boundary facilities fee, reviewing tax deduction arrangements for intellectual property-related industries, implementing a series of measures to support research and innovation-driven technological development in Hong Kong, further developing the mega-event economy to revitalize the Hong Kong brand, and promoting the growth of green finance and the further development of green transportation. Overall, the Institute welcomed the Budget’s pragmatic approach to fiscal consolidation while aiming to maintain the quality of public and social services. Meanwhile, the Budget’s targeted revenue-generating measures should contribute to financial stability and provide support for sustained economic growth amid global economic and geopolitical challenges. Read the Institute’s press release for more details. Institute welcomes government’s inclusion of accounting talent in the “Talent List”; visits Malaysia to build bridges for the accounting profession In February, the Institute welcomed the government’s announcement of the new Talent List, effective from 1 March. The inclusion of the accounting profession in the updated Talent List, as recommended by the Institute, will help expand the pool of accounting professionals and fill industry vacancies, ensuring the quality of services in Hong Kong’s accounting sector. “We are pleased the government adopted the HKICPA’s recommendation to include the accounting profession in the updated Talent List. This, along with a series of measures previously introduced by the government to attract nonlocal talent, such as expanding the list of universities under the Top Talent Pass Scheme, will help alleviate the manpower shortage in the industry,” said Institute President Edward Au. “On the other hand, the HKICPA will also continue its multifaceted approach to nurturing local accounting talent, including promoting the core values and importance of the accounting profession to the young generations and the general public, and regularly enhancing curriculum of the Qualification Programme (QP) to NEWS Institute news Business news 4 2025 Issue 2 Institute’s Strategic Plan 2025 is out The Institute hosted a booth at the two-day Career Fair of the Guangdong-Hong KongMacao Greater Bay Area Talent Development Showcase held in Kuala Lumpur in April.
APLUS meet market demands, with an aim to maintain the service quality of Hong Kong’s accounting sector,” continued Au. Read the press release to learn more. This dedication to promoting the Hong Kong profession saw the Institute travelling to Malaysia in April. President Au led a delegation to Kuala Lumpur for the GuangdongHong Kong-Macao Greater Bay Area Talent Development Showcase organized by the Hong Kong Talent Engage, an office under the Labour and Welfare Bureau of the government. At the event, the President participated in a panel discussion on “Hong Kong as a Super Connector: Opportunities for Talent” at the symposium, while the Institute hosted a booth for the two-day Career Fair to promote the Institute’s QP and attract overseas talent for the Hong Kong accounting industry. In addition, the delegation met with the Malaysian Institute of Accountants to deepen collaborations between the Hong Kong and Malaysian accounting ecosystems. List of accounting firms helping Mainland enterprises go global To help Chinese Mainland enterprises tackle the challenges of venturing abroad, the Institute has compiled the “List of accounting firms helping Mainland enterprises go global”. As of 10 April, this list includes 81 Hong Kong accounting firms, covering details such as firm size, target overseas markets, international experience, and business expertise. This resource aims to connect Mainland enterprises with the right accounting firms, facilitating global market expansion by leveraging Hong Kong’s world-class professional services to support Chinese businesses in their overseas journeys. Firms interested in joining may fill out this form, and will be contacted. HKICPA and HKEAA collaborate to introduce Computer-based Examinations for the QP The Institute announced the launch of Computer-Based Examinations (CBE) for the QP in collaboration with the Hong Kong Examinations and Assessment Authority (HKEAA) in March. This strategic move aims to provide the QP students with a paperless, secure and fully digitalized assessment experience, making the examination process more dynamic and efficient, while enhancing accessibility and contributing to environmental sustainability. Institute President Au, said, “The implementation of CBE marks a significant step forward for the QP, bringing it into the digital age and enhancing the experience for our students while also embracing environmental sustainability. This transition not only aligns with the global trend towards paperless assessments but also provides a more dynamic and efficient platform for our candidates and reduces our environmental footprint. The HKICPA remains committed to providing world-class training and supporting the career development of CPAs, contributing to Hong Kong’s continued success as a leading international financial centre.” CBE will be rolled out in phases, covering Associate, Professional, and Capstone levels in both Hong Kong and Mainland China. Read the press release to learn more. Introducing the Member Assistance Programme The Institute launched a new Member Assistance Programme in March. This initiative is designed to provide the Institute’s members with valuable and accessible support resources tailored to support their emotional and mental wellbeing. Core services include 24/7 hotline, face-to-face counselling, virtual counselling, online learning resources and members wellness programme. All Institute members and registered students in Hong Kong, along with their immediate dependents (spouses and children up to the age of 21) are eligible for the programme. Institute held sharing on the Two Sessions 2025 More than 300 participants joined the Institute’s Public Affairs Series event on 21 March to hear insights on national development from esteemed The Institute’s Public Affairs Series event – Sharing on the Two Sessions 2025, held on 21 March, saw more than 300 participants. 2025 Issue 2 5
members including National People’s Congress representatives, Starry Lee and Tim Lui, as well as the Chinese People’s Political Consultative Conference members, Agnes Chan and Stephen Law. They provided invaluable insights from this year’s Two Sessions in Beijing and its implications for Hong Kong and the accounting profession. Council meeting minutes The abridged minutes from the December 2024, January 2025 (Strategy Day) and February 2025 Council meetings are now available. Disciplinary findings Chow Yee Complaint: Failure or neglect, without reasonable excuse, to comply with a direction issued by the Practice Review Committee (PRC) under section 32F(2)(b) of the preamended Professional Accountants Ordinance (Cap. 50); and being guilty of dishonourable conduct. Chow was practising under his own name. His practice was selected for an initial practice review in March 2020, during which deficiencies were identified, including those in relation to the practice’s quality control system and its audit of a private entity. The review also found that the registered office address of Chow was no longer in use. A follow-up visit to the practice was scheduled for June 2021. However, the review could not take place due to Chow’s refusal to provide the requested documents for practice review, and Chow also refused to allow the practice reviewer to conduct a follow-up site visit. In July 2021, the PRC issued a written direction to Chow, requiring him to provide the necessary information and to cooperate with the Institute with respect to the practice review. The direction was mailed to Chow’s registered residential address. The PRC considered that Chow’s above failures were serious and decided to lodge a complaint against Chow. Decisions and reasons: The Disciplinary Committee found Chow was guilty of dishonourable conduct. The committee reprimanded Chow and ordered the removal of Chow from the register of CPAs for a period of 24 months and his practising certificate be cancelled for 24 months with effect from 10 March 2025. Chow was also ordered to pay the costs of the disciplinary proceedings in the sum of HK$107,443. Sze Lin Tang, CPA (practising) and Zhonghui Anda CPA Limited Complaint: Failure or neglect to observe, maintain or otherwise apply Hong Kong Standard on Auditing (HKSA) 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Hong Kong Standards on Auditing and HKSA 500 Audit Evidence. Zhonghui was the newly appointed auditor of National United Resources Holdings Limited, a Hong Kong listed company. It audited the consolidated financial statements of the company and its subsidiaries (collectively Group) for the year ended 31 December 2015 and expressed an unmodified auditor’s opinion on 30 March 2016. Sze was the engagement director. The Institute received a referral from the then Financial Reporting Council (FRC) about irregularities in the audit. Information provided in the referral showed that the financial statements included a material receivable amount of HK$305 million that had resulted from the Group’s one-off sale of straight run fuel oil to a customer. When Zhonghui signed the auditor’s report in March 2016, approximately 60 percent of receivable amount was overdue and outstanding. The respondents failed to exercise professional scepticism and perform adequate audit procedures to support their agreement with the company’s assessment that no impairment was necessary for the outstanding amount. Decisions and reasons: The Disciplinary Committee reprimanded the respondents and ordered them to pay a penalty of HK$35,000 each. In addition, the respondents were ordered to jointly and severally pay costs of the Institute and the then FRC totalling HK$210,343. In reaching its decision, the committee considered the submissions from both parties, the nature of the complaint, the involvement of a listed company, the respondents’ clear record and their conduct during the proceedings. The respondents appealed against the Disciplinary Committee’s decision. The appeal was subsequently dismissed on 23 January 2025. Details of the disciplinary findings are available on the Institute’s website. 6 2025 Issue 2
NEWS Business HK$17.7 billion The amount raised across 15 Hong Kong initial public offerings (IPOs) in the first quarter of 2025, nearly three times higher than the funds raised in the same period last year, and the highest first quarter amount since 2021, according to KPMG China. This was driven by a 25 percent increase in the number of completed deals, and by six IPOs exceeding HK$1 billion in funds raised. Hong Kong is witnessing a surge in foreign capital as investors flee U.S. tariff uncertainties, noted Financial Secretary Paul Chan in his official blog. He pledged to promote the city’s safe and stable environment as a free port, amid the reciprocal tariffs imposed by the U.S. on its trading partners, which had brought uncertainties to the global trading and investment environment. Chan also noted increased foreign investment in Mainland Chinese companies, driven by the Mainland’s economic resilience and innovation. 2025 Issue 2 7 47% The percentage of investigations by the United Kingdom’s Financial Reporting Council that took more than two years to complete, according to figures published in 2024. The U.K. accounting watchdog has launched a comprehensive review of its misconduct investigation processes, aiming to streamline probes and explore “broader” regulatory tools. The move follows criticism over lengthy investigations, burdening firms and partners, reported the Financial Times. The number of Deloitte U.S. contracts terminated since January, worth more than US$1.16 billion, by the Department of Government Efficiency in the U.S., led by Elon Musk, according to Fortune’s analysis. Deloitte faces more than double the cuts of any other consultancy, with Accenture losing 30 contracts. The crackdown targets wasteful spending, prompting firms to justify costs. The International Monetary Fund’s (IMF) reduced global growth forecast for this year. It also cut its 2026 forecast to 3 percent, citing the impact of United States tariffs and rising trade tensions. This is lower than its projection in January, by 0.5 percentage point for 2025 and 0.3 percentage point for 2026, with downward revisions for nearly all countries, according to the IMF’s latest World Economic Outlook. The IMF called the report a “reference forecast” based on measures announced as of 4 April. 2.8% APLUS 120+ – Lee White, the International Federation of Accountants (IFAC) Chief Executive Officer. IFAC revised its International Education Standards to embed sustainability skills in accountants’ training. The revisions establish a global baseline of sustainability competence. IFAC calls on stakeholders to begin preparing for implementation, with early adoption encouraged ahead of the 1 July 2026 effective date. “These revisions to the education standards ensure that professional accountants worldwide develop the right competencies to implement sustainability reporting and assurance standards effectively.” 2nd Hong Kong clinched the title of the world’s second most crypto-friendly city, surpassing Singapore and Abu Dhabi, according to a report by migration platform Multipolitan. The city ranked behind Ljubljana, capital of Slovenia, in the report’s Crypto Friendly Cities Index 2025, which evaluates cities based on regulation, tax regimes, digital infrastructure and wealth. Since 2022, Hong Kong has rolled out new compliance requirements for crypto companies and licensed 10 trading platforms. >95,000 The number of auditors worldwide who will benefit from the deployment of artificial intelligence (AI) agents into KPMG U.S.’s smart audit platform Clara, the firm announced in April. The AI agents will automate tasks such as data analysis and document review, enhancing audit quality and efficiency. A new Financial Report Analyzer AI engine provides AI-generated output to enable auditors in completing required disclosure checklists. KPMG plans to deploy more AI agents within the next year.
PROFILE Benjamin Chan A small act of kindness causes a flurry of quiet laughter among staff at the Inland Revenue Centre. A taxpayer finds himself lost near the lobby of the relatively new 17-storey high building of the Inland Revenue Department (IRD) and unknowingly asks the Commissioner for help. Benjamin Chan doesn’t just tell him where to go but shows him, briskly walking him out of the lobby towards exactly where he needed to be. The incident calls to mind what Chan says is undoubtedly his primary responsibility as the Commissioner of Inland Revenue. “It’s of course to improve the overall efficiency of the tax administration, which benefits Hong Kong as well as the tax paying public,” he says. This includes providing quality services to the public, collecting revenues in a cost effective manner, and promoting tax compliance. He is also mindful of the IRD’s other important role as a business facilitator in the area of taxation. “This calls for the effective and pragmatic implementation of the tax initiatives developed by various policy bureaux. In recent years, the government has been very keen to develop various tax measures, including the introduction of preferential tax regimes for various industries, all with the aim to promote the whole economy. Throughout the development of these tax initiatives up to their implementation, the IRD has a crucial role to play,” says Chan. “When providing our technical input in the development stage, the most important thing is that a regime should be effective. We don’t want to introduce a regime that cannot be used by taxpayers. On the other hand, we need to maintain the integrity of the regimes.” Chan stepped into the Commissioner’s role in October 2024. The past few months have been “very busy,” he admits, reflecting on a schedule packed with back-to-back meetings, business trips, and high-stakes tax initiatives. Tax administration is only part of the job. What keeps him energized is seeing initiatives like BEPS 2.0 and enhancements to Hong Kong’s fund regimes, projects he was already grappling with in his previous role as the Deputy Commissioner (Technical), make headway. “It’s been rewarding because some tax initiatives have already been implemented and some are in good progress. For example, we have achieved a number of key milestones in our e-filing projects and our digitalization efforts Interview with Benjamin Chan, Commissioner of Inland Revenue KEEPING IT SIMPLE AN EFFECTIVE: THE IRD’S BALANCING 8 2025 Issue 2
APLUS As Hong Kong navigates Base Erosion and Profit Shifting (BEPS) 2.0 and beyond, Benjamin Chan, CPA-turned-Commissioner of Inland Revenue, is working to ensure the city’s tax system can remain simple, competitive, and fair, writes Jemelyn Yadao Photography by Wai Tsang T ND : G ACT 2025 Issue 2 9
PROFILE Benjamin Chan have made very good progress. Meanwhile,with BEPS 2.0, the Amendment Bill is close to completion.” On 8 January, the Amendment Bill to implementing the global minimum tax initiative under Pillar Two of BEPS 2.0 was introduced into the Legislative Council for first reading. As at 22 April, the government will move the committee stage amendments to the Amendment Bill upon resumption of the second reading debate of the Bill. Balancing global standards with local simplicity Hong Kong has long prided itself on its simple, low-tax system – a magnet for businesses worldwide. But global initiatives that require Hong Kong’s participation, including BEPS 2.0, AEOI (Automatic Exchange of Information), and the forthcoming CARF (Crypto-Asset Reporting Framework), are testing that model. Maintaining Hong Kong’s edge while meeting international standards is a key challenge faced by the IRD. “We need to uphold the competitive tax system of Hong Kong to provide a tax-friendly environment to businesses. But we also need to ensure that our tax system won’t be subject to abuse and its integrity is maintained. Both goals are very important.” The introduction of a global minimum tax under BEPS 2.0, requiring large multinationals to pay at least a 15 percent effective tax rate in every jurisdiction, has generated mixed reactions. Given that the global minimum tax regime is extremely complex and multinational enterprises that are subject to the regime (in-scope MNEs) may need to pay top-up tax if their jurisdictional effective tax rate in Hong Kong cannot reach 15 percent, some consider that it could undermine Hong Kong’s simple and low-tax advantage to a certain extent. Chan, however, is optimistic. “I cannot foresee any significant impact on our tax competitiveness because quite a number of large developed economies have already implemented the global minimum tax or their domestic minimum top-up tax from 2024 or 2025,” he says, citing jurisdictions including the EU-member states, the United Kingdom, Australia, Japan and Canada. “Even if Hong Kong doesn’t implement the rules, it won’t bring benefits to large MNEs. It will just cede Hong Kong’s taxing rights to other comparable jurisdictions which have already enacted the rules,” Chan asserts. He points out in-scope MNEs can’t escape the tax by relocating to non-compliant jurisdictions with BEPS 2.0’s backstop rule (also known as Undertaxed Profits Rule). For Chan, this levels the playing field, particularly against no or nominal tax jurisdictions. “In the past, some jurisdictions didn’t impose tax or just imposed tax at a nominal rate, and that was the major reason for MNEs to establish there. Now, those profits can be taxed elsewhere, so there’s less incentive for in-scope MNEs to set up or maintain the entities in those jurisdictions.” This shift, Chan argues, positions Hong Kong as an attractive destination for businesses. “We just impose tax up to 15 percent, unlike many developed economies with higher rates,” he says. Coupled with Hong Kong’s company redomiciliation regime, Hong Kong could draw companies from low-tax jurisdictions, he adds. “It’s a very good opportunity for us to attract those entities to relocate to Hong Kong,” he enthuses, highlighting non-tax advantages such as the city’s financial infrastructure, as well as the robust economic and regulatory framework. Chan describes Hong Kong’s BEPS 2.0 journey as “carefully planned and engagement-driven.” The groundwork began in 2020 with an advisory panel set up by the government consisting of academics, tax practitioners, and MNE representatives. “We all sat together to assess the impact. At that time, the design features weren’t settled – just the idea of a global minimum tax,” he recalls. The design features of the proposed regime is a combination of constructive input from various stakeholders balanced against Organization for Economic Co-operation and Development (OECD)’s strict model rules. “For areas where the OECD rules allow domestic adaptation, we adopted stakeholder suggestions. But where the rules are fixed, we had to explain there’s no room to depart,” Chan says. To support in-scope MNEs, the IRD has established a dedicated team to provide technical support and will issue detailed guidance on areas left open by the OECD for domestic consideration. “We’ll provide guidance to help taxpayers understand how we interpret those rules,” says Chan. Transforming tax administration Chan is also driving a digital revolution at the IRD. The push for e-filing of profits tax returns, requiring financial statements in the computer-readable inline eXtensible Business Reporting Language (iXBRL) format, was driven by a 2018 IT plan to upgrade “ We need to uphold the competitive tax system of Hong Kong to provide a taxfriendly environment to businesses. But we also need to ensure that our tax system won’t be subject to abuse and its integrity is maintained.” 10 2025 Issue 2
APLUS Benjamin Chan joined the Inland Revenue Department in 1998, and was responsible for handling individual tax matters in his first post. He later went on to play a significant role in taking forward the BEPS project in Hong Kong, enacted by the Organization for Economic Co-operation and Development. 2025 Issue 2 11
PROFILE Benjamin Chan the department’s IT infrastructure as well as OECD’s recommendation in the peer review of Hong Kong’s performance on handling exchange of information requests in 2019. “The OECD advised us to issue more tax returns to taxpayers because currently not every company will file their tax returns annually,” Chan explains. “If another jurisdiction requests financial data and we don’t have it, it causes delays.” E-filing solves this by streamlining data collection for Hong Kong’s 1.4 million companies. To pave the way for the implementation of full-scale mandatory e-filing of profits tax returns in 2030, the IRD launched voluntary e-filing in 2023, where all corporations and partnership businesses can e-file their profits tax returns together with financial statements and tax computations in iXBRL format. The first phase of mandatory e-filing will start with the in-scope MNEs entities from April 2026. The scope will then be expanded gradually to cover more companies and business groups. Chan acknowledges the challenges for small- and mediumsized enterprises (SMEs), particularly as converting financial statements to iXBRL requires tagging data, a process that demands time and expertise. To support SMEs, the IRD offers free data conversion tools, training videos, webinars, and hands-on sessions. “We have developed iXBRL data conversion tools for use by SMEs free of charge,” Chan says, addressing the lack of commercial alternatives in Hong Kong. “We have also arranged online webinars and hands-on training to facilitate businesses to adapt to the change. Furthermore, a roll-over function is featured in the data preparation tools to enable migration of tags from the previous finalized data files to save re-tagging effort in subsequent years.” This digital push isn’t just about compliance but also about Chan, who was appointed as the Commissioner of Inland Revenue in October 2024, credits his CPA training for giving him the soft skills needed to carry out his double taxation agreement talks as the head of Hong Kong’s delegation in treaty negotiations. 12 2025 Issue 2
APLUS Hong Kong has now signed DTAs with 51 jurisdictions, with 17 more in negotiation. Expanding Hong Kong’s tax treaty network is a goal for the government. . efficiency, Chan emphasizes. “We would like to obtain more information in the electronic format to facilitate our assessment work and avoid the consumption of paper.” The IRD is also launching three new dedicated portals under eTAX in July, namely Business Tax Portal (BTP), Individual Tax Portal and Tax Representative Portal, to enhance e-filing functions for businesses, individual taxpayers and tax representatives respectively. The BTP is a new electronic platform dedicated for businesses to handle tax and business affairs in a more convenient and efficient way. A competitive future Looking ahead, Chan sees technology as the key to optimizing Hong Kong’s tax system. “We’ve collected a vast amount of electronic data from country-by-country reports and Common Reporting Standard (CRS) data from the AEOI process, which are all financial account data from other jurisdictions. In the future, I think these types of data will allow us to perform tax profiling and identify cases with high risks or exceptions to carry out an audit.” There are also possible areas where artificial intelligence (AI) could facilitate the IRD’s tax audit work, says Chan. For example, in examining tax returns, drafting query letters, drafting replies to taxpayers’ enquiries, or forecasting tax revenue. But hurdles are hard to ignore: cost, training, and data security. “We would need to develop our own AI tool to avoid security risks on taxpayers’ data,” he says. “However, use of AI solutions for improving efficiency should be the upcoming trend and there is no exception to tax administration.” Expanding double taxation agreements (DTAs) for Hong Kong – currently at 51, with 17 more in negotiation – is another goal. “We will do more to expand our treaty network and continue assisting policy bureaux to develop preferential tax regimes for a range of industries,” he says. Chan, a Hong Kong Institute of CPAs member, says CPAs play a pivotal role in further enhancing Hong Kong’s tax system, particularly in offering technical input and explaining rules to clients. “CPAs who are tax advisors have a very solid understanding of their clients’ operations and have developed a mutually collaborative relationship. This puts those advisors in a good position to adequately explain the tax laws to the taxpayers, encourage them to self-comply and make use of our voluntary disclosure programmes after irregularities in the taxpayers’ books or accounts are identified,” he says. How to be well-rounded With the international tax landscape changing rapidly, Chan sees capacity building for IRD officers as a priority and a challenge. “The OECD has launched many initiatives and a number of them have been implemented in Hong Kong. Our officers need to stay ahead of all these changes to ensure that they have the knowledge to carry their duties effectively,” he says. Training courses, OECD seminars, and job rotations ensure versatility. Chan explains that every few years, officers switch roles across different specialties within the department, ranging from profits tax to field audits to technical research, just to name a few. “Every aspect of taxation is very unique. So this job rotation enriches their expertise and makes the job more interesting.” On this note, Chan’s advice for young CPAs eyeing careers in tax, is to seek diverse roles within taxation if the opportunity comes up. “If you can handle every aspect, it puts you at a great advantage,” he says. Chan also urges them to master the fundamentals, and not just memorize the laws. “Understand the rationale behind them,” he says. “As potential tax advisors, it’s important to understand how to interpret the rules or how to apply them, facilitating the client’s compliance.” Working in different units in the IRD since joining the tax administrator in 1998 has laid a strong foundation for Chan, preparing him for his current role. And so did his journey to becoming a CPA. “It gave me solid tax and accounting knowledge,” he reflects. Auditing MNEs’ complex financial statements during his field audit stint relied heavily on that expertise. The soft skills he developed throughout his CPA training has also proved vital, especially now as he leads double taxation agreement talks. “Working in the field audit and investigation section, I needed to negotiate a good deal for the department. Now, as the head of Hong Kong’s delegation in treaty negotiations, I need to negotiate a good deal for the Hong Kong SAR,” he says. Negotiating a reduced tax rate that benefits business for both jurisdictions can be especially complex with a high tax jurisdiction, Chan notes. “Convincing the other side that a double tax agreement can promote the economic relationship between two jurisdictions so that lower rates can be agreed upon is indeed a skill, and I was able to obtain that skill through my training as a CPA.” “ Working in the field audit and investigation section, I needed to negotiate a good deal for the department. Now, as the head of Hong Kong’s delegation in treaty negotiations, I need to negotiate a good deal for the Hong Kong SAR.” 51DTAs SIGNED 2025 Issue 2 13
RESTRUCTURING AND INSOLVENCY Cross-border issues THE EVOLVING LANDSCAPE OF CROSS-BORDER RESTRUCTURING AND INSOLVENCY As cross-border restructurings and insolvencies continue to rise, experts in restructuring and insolvency talk to Jolene Otremba about cross-border developments and complexities, and the opportunities that a career in this intricate field can offer A s the global economy faces unprecedented challenges, the intricacies of cross-border restructuring and insolvency (R&I) have come to the forefront of financial discourse. The tumultuous interplay of high inflation, geopolitical tensions, and evolving corporate structures has created a complex landscape for businesses operating internationally. In this environment, the necessity for effective insolvency frameworks and innovative restructuring strategies has never been more critical. In fact, the conference held in Hong Kong in March by INSOL International (INSOL), the global federation of national associations of accountants and lawyers who specialize in turnaround and insolvency, highlighted the urgent need for legislative reform and enhanced collaboration across jurisdictions. Experts emphasized the vital role that the city plays in shaping global insolvency practices, particularly through innovative agreements and frameworks that facilitate cross-border cooperation. “We are in a difficult economic period – with a shift towards a low-investment, low-growth and (on a geopolitical level) low-cooperation era,” explains Alastair Beveridge, Partner and Managing Director of AlixPartners’ global INSOL International, the global federation of national associations of accountants and lawyers who specialize in turnaround and insolvency, held its annual conference in Hong Kong on 17-19 March. 14 2025 Issue 2
APLUS Turnaround and Restructuring practice, as well as President of INSOL. Elaborating on this, he adds that the current economic climate is “a combination of the overlapping shocks of high inflation (which is only now beginning to moderate) and higher interest rates, tariff challenges, weakening global demand, low investment, business and consumer confidence, and increased geopolitical tensions” which has left the global market precariously balanced, striving to avoid a recession. Indeed, the latest insights from Allianz Trade’s Global Insolvency Report, released on 18 March, projects a troubling rise in global business insolvencies, forecasting a 6 percent increase in 2025 and a further 3 percent in 2026. This would translate to an additional 6,800 insolvency filings in the United States and nearly 10,000 extra filings in Western Europe alone, with micro, small, and medium enterprises making up the bulk of these cases. In this intricate world of international business, crossborder restructuring has become a critical discipline, says Ian Mann, Co-chair of the INSOL Hong Kong conference, Partner of international law firm, Harneys, and a member of the Institute’s Restructuring and Insolvency Faculty Executive Committee (RIFEC). “Companies are by definition international today. The rise of cross-border insolvencies is just a reflection of companies having globalized in decades earlier,” Mann says, highlighting the fundamental shift in corporate structures. “If you have a multinational company with headquarters in the Cayman Islands, operations potentially in China, and listed in the United States, that’s an incredibly international company,” Mann says. When such companies face financial challenges, the restructuring process becomes intricate. “The courts of all those places absolutely need to be flying in formation to protect creditors, to protect investors,” he adds. The need for legislative reform Economic pressures have also accelerated the need for effective restructuring frameworks. Mann points to factors such as “the slowdown in the Chinese economy, higher inflation, and a post-COVID hangover,” which are creating unprecedented restructuring needs. More critically, he asserts that “geopolitics and the imposition of tariffs is going to completely change the way in which manufacturing, exports, and logistics are done,” adding significant financial complexities to the mix. Daniel Chow, Senior Managing Director at FTI Consulting, and Chairman of the RIFEC, echoes these sentiments and focuses on Hong Kong’s unique situation. He argues that there is a great need for legislative improvements in Hong Kong’s legal framework to better support restructuring efforts in the region. “We don’t have a modern corporate rescue regime in Hong Kong and only rely on the scheme of arrangement and common law recognition of other jurisdictions in the past decades,” Chow explains, highlighting that a draft bill has been pending for around 25 years. This absence of a formal rescue law hampers companies’ ability to restructure effectively. “A proper rescue law in Hong Kong is like adding one more essential tool in our restructuring toolbox. It actually could improve the current restructuring regime and could save more companies from bankruptcy or help resolve more severe financial difficulties,” he explains, as it would provide essential legal protection and tools for businesses to focus on refinancing without interruption from creditor actions. Equally important, Chow notes, is the introduction of an insolvent trading law. “This has been in the law for many other modern common law-governed restructuring jurisdictions for a long time, but Hong Kong still doesn’t have that.” Such legislation would hold directors accountable for their actions during financial difficulties, promoting more responsible corporate governance. “The adoption of corporate rescue legislations together with the introductions of insolvent trading laws would bring Hong Kong in line with other jurisdictions,” says Chow. A restricted environment Tiffany Wong, Managing Director with Alvarez & Marsal’s Restructuring Practice in Hong Kong, describes Hong Kong’s current restructuring environment as “quite restricted.” She highlights the fundamental issue of lacking a formal restructuring regime, stating: “Without a formal restructuring regime, there’s simply no automatic stay on proceedings and moratorium.” This gap means that companies in financial distress face immediate pressures from creditors, complicating their recovery options. In an environment where agility and responsiveness are crucial, the absence of such legal structures can severely hinder recovery efforts. Wong also points to the “ Companies are by definition international today. The rise of crossborder insolvencies is just a reflection of companies having globalized in decades earlier.” 2025 Issue 2 15
RESTRUCTURING AND INSOLVENCY Cross-border issues geopolitical landscape, noting that “the uncertainty... particularly with international players, is enormous.” Multinational companies are increasingly exploring ways to restructure their businesses through what she calls “rationalization projects” to stay competitive amid global economic shifts. As such, she sees innovative approaches emerging with businesses demonstrating creative cross-border restructuring strategies. Wong emphasizes that companies today are exploring alternative jurisdictions outside of Hong Kong for debt restructuring, reflecting a shift towards a more globalized approach to financial recovery. Cross-border complexities In this landscape, Phyllis McKenna, who recently retired from her role as the Official Receiver (OR), acknowledges significant challenges when it comes to crossborder insolvency. Regarding the cooperation with the Mainland China, she explains, “We have common law; they are civil law. We are insolvencyfocused; they are restructuringfocused,” underscoring the fundamental legal differences that complicate cooperation. “While we’re moving towards modified universalism, as a concept that we all think is great, I think when it actually comes to putting it into practice, it is quite difficult.” Central to the legal concept of “modified universalism” is the idea that it is fairer to all creditors if there is a unitary and universal liquidation, generally in the place of the company’s incorporation. Achieving seamless cross-border insolvency cooperation, according to McKenna, requires a nuanced, patient approach that respects the unique characteristics of both legal systems while seeking common ground. She is also an advocate for research and innovation in developing effective R&I solutions. A key recommendation she has is the critical need for empirical research. “We would love to see some data... what is that data that we need? Jobs saved, benefits added to the economy – things that are really tangible.” However, McKenna recognizes that there are practical challenges. “There are obviously difficulties, as there are in any cross-border situation with different regimes, particularly in the determination of a debtor’s Centre of Main Interests.” This underscores the complexity of cross-border insolvency and the need for continued dialogue, mutual Charting a professional course In a world where financial landscapes shift with lightning speed, the field of restructuring and insolvency (R&I) offers plenty of opportunity for young professionals. As experts navigate the complexities of cross-border cases and evolving corporate structures, they offer invaluable advice for those looking to embark on this dynamic career path. “You have to be extremely good with people,” says Ian Mann, Partner of international law firm Harneys, and a member of the Institute’s Restructuring and Insolvency Faculty Executive Committee. In an era where companies span continents, the ability to “persuade, cajole, and understand foreign laws” is crucial. Mann’s message is clear: there’s no one-sizefits-all approach to learning this intricate field. Echoing this sentiment, Alastair Beveridge, President of INSOL International, urges newcomers to build connections and broaden their horizons. “Network, network, network – attend industry events, join professional organizations,” he advises. This proactive approach not only fosters relationships but also cultivates a robust knowledge base. “Excel in your basic degrees and stay on top of market developments to remain ahead of the game,” Beveridge adds, highlighting the importance of continuous education. The Hon Madam Justice Linda Chan, Judge of the High Court in charge of the Companies and Bankruptcy List, also paints an even more vibrant picture of the industry calling it “full of potential” citing that: “If I were to start over again, I would probably start in that area exclusively.” She encourages young practitioners to embrace challenges and seize the wealth of learning opportunities available. “There’s a lot to learn. This is an area which has great value in building up experience that cannot easily be replaced,” Judge Chan asserts, emphasizing that practical skills are essential for managing complex crossborder cases. As the R&I landscape continues to evolve, the call for creativity, adaptability, and collaboration resonates louder than ever. For those ready to dive into this field, experts promise that it will not be just a chance at professional growth, but an opportunity to play a pivotal role in the global economy’s recovery. Alastair Beveridge 16 2025 Issue 2
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