Transfer pricing legislation expected by late 2017 | KPMG | BE

Hong Kong: Transfer pricing legislation expected by late 2017

Transfer pricing legislation expected by late 2017

The Hong Kong government this week issued report of findings of a consultation and that explains the plans for implementing a new transfer pricing regime in Hong Kong law.

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Comments received during the consultation period that ended 31 December 2016 reveal support for codifying transfer pricing rules into Hong Kong tax law. The government plans to introduce a legislative proposal by the end of 2017, and that bill can be expected to refer to the OECD’s transfer pricing guidelines (and noting which version is to be followed). The Inland Revenue Department (IRD) subsequently would be expected to issue guidance in an effort to facilitate an understanding of the transfer pricing rules (including measures that would authorize the IRD to adjust the profits or losses of entities that engage in non-arm’s length transactions with related parties).

The consultation report sets out the foundation for a transfer pricing regime, and addresses the following areas:

  • Mandatory transfer pricing documentation measures, with an exemption from the requirement for transfer pricing documentation when certain thresholds are not met
  • Domestic transactions to be included under the transfer pricing regime
  • Specific provisions concerning intellectual property 
  • Penalties for non-compliance (including penalties of up to 300% of the underpaid tax if there is no “reasonable excuse” or there is a willful attempt to evade tax)
  • Advance pricing arrangement (APA) regime

 

Read an August 2017 report [PDF 175 KB] prepared by the KPMG member firm in Hong Kong

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