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Transfer Pricing Tax Alert - 9 January 2012 - EY - China

Hong Kong Tax Transfer Pricing Alert : 9 January 2012

Hong Kong IRD to start accepting
BAPA requests

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Contacts for financial services

Financial Services Transfer Pricing, Hong Kong
Patrick Cheung
Asia Pacific FSTP Leader
+852 2846 9905
Justin Kyte
+852 2629 3880
Jonathan Thompson
+852 2629 3879
Ali Tse
+852 2849 9298
Jack Fernandes
+852 2629 3990
Helen Chen
+852 2629 3927
Kalok Chu
+852 2629 3044
 
Financial Services Tax, Hong Kong
Florence Chan
Greater China FSO Regional Tax Leader
+852 2849 9228
James Badenach
Asia Pacific BCM Tax Leader
+852 2629 3988
John MacArthur
Asia Pacific FSO ITS Leader
+852 2629 3808
 

Contacts for other industries

Transfer Pricing
Hong Kong
Martin Richter
+852 2629 3938
Kenny Wei
+852 2629 3941
Sangeeth Aiyappa
+852 2629 3989
 
People's Republic of China
Jessica Tien
+86 21 2228 2115
Joanne Su
+86 10 5815 3380
Enoch Hsu
+86 755 2502 8287
 
Principal Hong Kong Tax
Tracy Ho
+852 2846 9065
Agnes Chan
+852 2846 9921

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.

1 http://www.legco.gov.hk/yr10-11/english/fc/esc/papers/e10-15e.pdf

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