Transfer Pricing Legislation Comes to Hong Kong to Implement the OECD Standards
On 29 December 2017, the Government of Hong Kong Special Administrative Region (the Government) published in its Official Gazette an amendment bill (Inland Revenue (Amendment) (No. 6) Bill 2017) for further reading at the Legislative Council (LegCo) (Amendment Bill No. 6).
The main objectives of the Amendment Bill are to codify the transfer pricing principles into the Inland Revenue Ordinance (Cap. 112) (IRO) and implement the minimum standards of the Base Erosion and Profit Shifting (BEPS) package promulgated by the Organisation for Economic Co-operation and Development (OECD).
The BEPS package seeks to counter the exploitation of gaps and mismatches in tax rules by multinational enterprises to artificially shift profits to low or no-tax locations where there is little or no economic activity.
The Amendment Bill also includes amendments to the IRO to ensure that certain tax regimes are consistent with the latest requirements of the OECD and the European Union on fair taxation.
The Amendment Bill No. 6 proposes to amend the IRO to:
- Codify rules on transfer pricing
- Require income or loss from provisions between associated persons to be computed for tax purposes on an arm’s-length basis
- Provide for an advance pricing arrangement (APA) regime
- Require documentation relating to transactions (intra-group transactions and intra-entity dealings)
- Introduce a statutory dispute resolution mechanism
- Enhance the current tax credit system
- Amend certain preferential tax regimes
- Incorporate the substantial activities requirement from the Organisation for Economic Co-operation and Development (OECD) for certain tax regimes
Should you have any questions please feel free to contact Alina Moroz at alinam@zetland.biz.
|
