The OECD has put forward new
initiatives to enhance tax transparency and counter Base Erosion and Profit
Shifting (“BEPS”). Hong Kong is committed to implementing the minimum standards
under the BEPS initiatives. To this end, the Hong Kong Government has
introduced a new set of transfer pricing legislations (“TP rules”) on 13 July
2018. An important requirement under the new TP rules is that certain
Hong Kong companies will be subject to country-by-country (“CbC”) reporting
The key elements in the New TP Rule include:-
For multinational enterprises having establishment(s) in Hong Kong and deriving consolidated group revenues exceeding the threshold (HK$6.8 billion for a Hong Kong ultimate parent entity or EUR750 million for other cases) in the immediately preceding accounting year, a Hong Kong Entity within the Group is required to make a country-by-country reporting (“CbCR”) notification to the Inland Revenue Department (“IRD”) within 3 months after the end of the relevant accounting period; and
Unless certain exemptions are met, the Hong Kong Entity is required to file a CbCR return with the IRD within 12 months after the end of the relevant period.
Following the above requirements, you, if designated by the Group as the “Reporting Entity” in Hong Kong, may be required to make a CbCR notification to the IRD by 31 March 2019 (i.e., 3 months after accounting year-end date). Depending on the information contained in the CbCR notification submitted to the IRD, the IRD may subsequently issue a CbC return to the Reporting Entity. The Reporting Entity is required to file the CbC return and CbCR to the IRD by 31 December 2019 (i.e., 12 months after accounting year-end date). The CbCR notification and filing are required to be made electronically via the IRD’s CbCR portal (https://aeoi.ird.gov.hk/cbc_portal/landing/).
Under section 58H of the Inland Revenue Ordinance (Cap. 112), a Hong Kong entity of a reportable group is required to give a notification in relation to country-by-country (“CbC”) reporting for an accounting period. The notification must be given electronically via a designated platform, namely the CbC Reporting Portal, within 3 months after the end of the accounting period (“notification deadline”). This requirement applies to an accounting period beginning in or after 2018.
If the first accounting period for which the Hong Kong entity has to give the notification (“first accounting period”) begins on 1 January 2018, the relevant notification deadline will be 31 March 2019. However, the Department recognizes that the Hong Kong entity and the service provider engaged by the entity (if any) may need more time to get familiar with the requirements and procedures for giving the notification via the CbC Reporting Portal. Hence for the first accounting period beginning on 1 January 2018, the Department would accept the Hong Kong entity and its service provider as having complied with the time limit prescribed under section 58H, provided that the notification is received via the CbC Reporting Portal on or before the expiry of 45 days after the relevant notification deadline (i.e. 15 May 2019).
Please note that the above treatment only applies to the first accounting period beginning on 1 January 2018. If the first accounting period begins after 1 January 2018, the notification deadline should be duly observed.