On 31 July 2017, the Hong Kong government released the consultation report on measures to counter base erosion and profit shifting (BEPS) by enterprises. Hong Kong indicated its commitment in June 2016 to implementing the BEPS package put forward by the Organisation for Economic Co-operation and Development (OECD). To take forward Hong Kong’s commitment, the Government held a consultation exercise from October 26 to December 31, 2016, to gauge views on the relevant implementation proposals.

According to proposal on consultation report, Master and Local Files are not required to be prepared if the taxpayers meet either one of the two sets of exemptions which are now based on the size of the business (including turnover of less than HKD 200m, assets of HKD 200m and 100 employees) and Intercompany Transaction amounts (e.g. HKD 220m for tangible goods, HKD 44m for services).

The government welcomed the general support from the respondents for the proposed implementation strategy, which focuses on the four minimum standards set by the OECD (i.e. countering harmful tax practices, preventing treaty abuse, imposing a country-by-country reporting requirement and improving the cross-border dispute resolution mechanism) whilst maintaining Hong Kong’s simple and low tax regime. Having regard to the comments received, the authorities will fine-tune certain parameters of the proposals to address stakeholders’ concerns.

The government is pressing ahead with the preparatory work for the legislative exercise, with a view to introducing an amendment bill into the Legislative Council by the end of 2017.