February 2018 - Hong Kong to Introduce Transfer Pricing Legislation
Hong Kong has always been relying on a few provisions in its tax laws and a Departmental Interpretation Practice Note (“DIPN”) to combat tax avoidance through transfer pricing. Subsequent to joining the Organisation for Economic Co-operation and Development (“OECD”)’s inclusive framework for Base Erosion and Profit Shifting (“BEPS”) in June 2016 to counter BEPS, and publishing the outcome of the consultation exercise in July 2017, a draft bill mainly to implement key actions arising from the BEPS agenda was gazetted (Inland Revenue (Amendment) (No. 6) Bill 2017) (“Amendment Bill”) on 29 December 2017. It is expected to be passed before the summer of 2018.
The Amendment Bill introduces a statutory transfer pricing regime and the OECD-recommended transfer pricing documentation requirements, as well as other proposed changes for Hong Kong to meet the four minimum standards 1 of OECD’s BEPS Action Plans. It also significantly empowers the Inland Revenue Department (“IRD”) to combat transfer pricing avoidance.
This tax newsletter discusses the transfer pricing related provisions of the Amendment Bill.
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