The Hong Kong Inland Revenue Department (the HKIRD) has now indicated that it plans to roll out its Advance Pricing Arrangement (APA) programme in April 2012 according to a recent seminar organised by the HKIRD.

In 2009, the HKIRD released two transfer pricing related Departmental Interpretation and Practice Notes (DIPN). While DIPN No. 46 and DIPN No. 45 described the HKIRD’s general view with respect to transfer pricing and Mutual Agreement Procedures, they were largely silent on the availability of an APA under the various Comprehensive Double Taxation Agreements (CDTAs) signed by Hong Kong.

However, when the HKIRD created a new directorate to intensify its efforts in expanding Hong Kong’s CDTA network in April 2011, it noted the additional resources will also be directed towards the following areas:¹

• To continue active participation in international exchanges on taxation matters
• To prepare for peer review by the OECD Global Forum
• To cope with the increasing efforts and complexity of CDTAs including Competent Authority programme under MAP articles
• To implement an APA programme
  

Latest development in Hong Kong’s APA programme

• The HKIRD has indicated that it plans to start accepting APA applications from April 2012.
• A new set of DIPN will likely be issued shortly before the roll out of the APA programme. Prior to the official issuance of the new DIPN, there will be a consultation process.
• It is understood that in order to deploy its resources strategically and efficiently, the HKIRD may only entertain bilateral APA (BAPA) applications initially.
• However, during a BAPA process, if an agreement is not reached with the CDTA partner, the HKIRD may alternatively agree to proceed with a unilateral APA.

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