Transfer Pricing Contacts
There are a number of very positive observations that can be made of the draft DIPN 48.
Flexibility
First, the features of Hong Kong’s APA program, as revealed by the draft DIPN 48, appear to be largely consistent with the APA programs adopted by major trading counterparts of Hong Kong that have well established APA programs; such as the United Kingdom, mainland China and Japan.
The draft DIPN, we believe, provides useful guidance on each stage of the APA process and defines the boundaries of the applicability of the APA program. Alongside such guidance, the draft DIPN 48 makes numerous references to the need for flexibility at each stage, which we believe will be helpful in avoiding the creation of a rigid system.
Transparency
Another positive feature of the draft DIPN 48 is the importance given to transparency in the APA process, by ensuring that both parties disclose all relevant information. For example, the draft DIPN 48 notes that while the Commissioner can hire its own independent expert to analyze the facts and circumstances of the case, the enterprise will be kept informed and any advice provided by such experts will be shared with the enterprise.
The issue of transparency is further enhanced by committing the Commissioner and the enterprise to “mutual expectations” that require open dialogue, confidentiality of information, cooperation from both sides and in consideration of the requirements of the relevant DTA partner(s). Such features confirm the notion of an APA being a two-way process that requires commitment from all the parties involved.
Other features such as enabling the simultaneous resolution of collateral issues as part of the APA process we believe will help toward making this APA program more effective, by addressing potential extraneous barriers to an agreement.
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