Hong Kong Government proposes a bill, passed on 29th December 2017, with the goals to bring in the transfer pricing principles into a system and to execute the minimum standards released to tackle Base Erosion and Profit Shifting in Hong Kong.
The amendment mostly proposes to arrange the rules of transfer pricing into a systematic way, providing an advance pricing arrangement (APA) regime, improvising on quality of current tax credit system, bringing in a statutory dispute resolution mechanism, bringing in changes to certain preferential tax regimes, requiring documentations for transactions (intra-group transactions and intra-entity dealings) and as well as income or loss from provisions between associate persons to be computed for tax purposes on arm–length basis and also to constitute substantial activities requirement from OECD for tax regimes.
This Bill plays a huge role introducing a new revolution in Hong Kong’s transfer pricing regime as the Hong Kong Government allows the Inland Revenue Department to regulate an enterprise according to their profit and losses when an authentic transaction between two related persons departs from a transaction that would have been between two independent persons where the transactions creates a “tax advantage”. However, the bill will be up for further reading and debates on 10 January 2018.
