Transfer Pricing Hong Kong

The Hong Kong Inland Revenue Department IRD has published the following three Departmental Interpretation and Practice Notes DIPNs on 19 July 2019.

Transfer pricing hong kong. The Hong Kong Inland Revenue Department may allow rollback of transfer pricing methodologies adopted in bilateral or multilateral advance pricing arrangements to previous tax years. Most of the provisions within the BEPS Bill will have retrospective effect from year of assessment 201819. Transfer pricing documentation regulatory regime DIPN 58 reiterates that Hong Kong has adopted the OECDs 1 three-tiered standardized approach to preparing and maintaining documentation.

Provisions relevant to transfer pricing can be found in HKs domestic legislation which includes the Inland Revenue Ordinance Chapter 112 IRO and various double taxation agreements DTA. Transfer pricing in Hong Kong Echoing the initiatives of base erosion and profit shifting BEPS raised by the OECD more and more countries are adopting comprehensive transfer pricing rules and tightening transfer pricing administration. 6 Bill 2017 the BEPS Bill has passed.

Hong Kongs Transfer Pricing Documentation and Reporting Requirements. New Transfer Pricing Regime in Hong Kong On 13 July 2018 Hong Kongs new transfer pricing regime was enacted through the Inland Revenue Amendment No. Is Non-Hong Kong Sourced Income Subject to the Transfer Pricing Rules.

The new law codifies Hong Kongs transfer pricing rules for the first time and requires that the rules be interpreted in a way that ensures consistency with the OECD transfer pricing guidelines specifically the 2017 Transfer Pricing guidelines and the 2017 OECD model tax treaty which incorporate the changes under the BEPS initiatives. 10112019 The transfer pricing regulatory regime mandates Hong Kong entities to prepare transfer pricing documentation namely master file local file and country-by-country report. 10302020 Transfer pricing refers to the costs charged between a Hong Kong company and its related entities in transferring goods services and intangible property.

It is recommended to have at the very least documentation that explains how your transfer pricing has been determined. Hong Kong entities must under the new rules prepare master file and local file documentation. It also specifies thresholds for advance pricing arrangement applications.

712020 The Hong Kong government amended the Inland Revenue Ordinance in July 2018 in order to meet the international standards of transfer pricing developed under the OECD. Hong Kong transfer pricing legislation is a striking contribution to the anti-tax- avoidance of cross-border transactions especially to those who are part of a multinational company group. Agnes Lo Associate Professor Lingnan University Hong Kong and Raymond Wong Associate Dean City University of Hong Kong discuss guidance issued by the Hong Kong Inland Revenue Department July 18 setting out the IRDs views on transfer pricing permanent establishment and the foreign tax deduction.