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Hong Kong: BEPS legislation, enhanced transfer pricing enforcement regime

Hong Kong: BEPS legislation

A bill—the Inland Revenue (Amendment) (No. 6) Bill 2017—was gazetted on 29 December 2017, proposing a mandatory transfer pricing regime and anti-base erosion and profit shifting (BEPS) changes to Hong Kong tax law.

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The BEPS bill marks a significant step in Hong Kong’s transfer pricing enforcement regime. On the basis of the arm’s length principle, the Hong Kong government proposes fundamental transfer pricing rules that would authorize the Inland Revenue Department to adjust the profits or losses of an enterprise when the actual transaction between two related persons departs from a transaction that would have been made between independent persons, and the transaction created a “tax advantage.”

The introduction of the mandatory documentation requirements is based on the three-tiered approach of country-by-country (CbC) reporting, Master file, and Local file measures. The BEPS bill also provides details concerning an advance pricing arrangement (APA) programme and other related provisions. 

 

Read a December 2017 report prepared by the KPMG member firm in Hong Kong

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