Hong Kong is the latest tax jurisdiction to have its own transfer pricing law.
“Large” corporations in Hong Kong are expected to prepare transfer pricing documentation (i.e.., Transfer Pricing Master File, Local File and Country-by-Country Report). The IRD is also empowered to impose transfer pricing adjustments to Hong Kong taxpayers.
Cross-border Related party transactions has been the focus of the Hong Kong Inland Revenue Department since the enactment of transfer pricing rules into the Inland Revenue Ordinance. Companies should document their transfer pricing policies for their Hong Kong operations, meanwhile assess their risks through the exercise.
Our international tax and transfer pricing team can help you assess your global transfer pricing tax risk and advise on the tax efficiencies of group arrangement.
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Table 1: Threshold for Master File and Local File
Criteria (A): Based on size of business | Threshold (HK$) (港幣) | |
(i) | Total annual revenue (全年總收入) | > HK$400 Million (港幣四億元) |
(ii) | Total assets (總資產) | > HK$300 Million (港幣三億元) |
(iii) | Employees (員工總數目) | > 100 (一百人) |
Criteria (B): Based on related party transactions (any one out of the four below) | Threshold (HK$) (港幣) | |
(i) | Transfer of properties (excludes financial assets / intangibles) (有形資產交易 (不包括金融資產/無形資產)) | > HK$220 Million (二億二千萬) |
(ii) | Transactions in financial assets (金融資產交易) | > HK$110 Million (一億一千萬) |
(iii) | Transfers of intangibles (無形資產交易) | > HK$110 Million (一億一千萬) |
(iv) | Any other transactions (e.g. service income服務費收入/royalty income專利觀收入) | > HK$44 Million (四千四百萬元) |
Table 2: Deadline of preparing Transfer Pricing Documentation in Hong Kong
Transfer Pricing Documentation | Deadline |
Country-by-Country Report Notification | 3 Months after the Accounting Year-End |
Country-by-Country Report Filing | 12 Months after the Accounting Year-End |
Master File & Local File | 9 Months after the Accounting Year-End |