On 7 June 2017, the Commissioner of China’s State Administration of Taxation (SAT) signed, on behalf of Hong Kong, the OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, which aims to close loopholes in the current bilateral tax treaties and lessen the opportunity for tax avoidance.
In implementing the Multilateral Instrument, Hong Kong has taken a pragmatic approach, opting into the provisions of the Convention that represent the minimum standards including the principal purpose test for preventing treaty abuse and the requirement for allowing a minimum three-year period for a person to present its case for Mutual Agreement Procedure (MAP). Hong Kong has opted out of other provisions that are not mandatory such as provisions addressing hybrid mismatches and changes to combat artificial avoidance of a permanent establishment.
