OECD releases Hong Kong Stage 2 peer review report on implementation of Action 14 minimum standards

On 18 October 2021, the Organisation for Economic Co-operation and Development (OECD) released the Stage 2 peer review reports of Hong Kong relating to the outcome of the peer monitoring of the implementation of the Base Erosion and Profit Shifting (BEPS) minimum standards under Action 14 on improving tax dispute resolution mechanisms (Action 14 Minimum Standard). Stage 2 focuses on monitoring the follow-up of any recommendations resulting from Hong Kong’s stage 1 peer review report.

Overall, Hong Kong meets most of the elements of the Action 14 Minimum Standard. Where it has deficiencies, Hong Kong has worked to address some of them, which has been monitored in stage 2 of the process. The Stage 1 peer review report identified that some of the Comprehensive Double Taxation Agreements (CDTAs) that Hong Kong concluded are not in line with one or more elements of the Action 14 Minimum Standard. While these CDTAs are not yet updated as of today, it is expected that they will be modified to include the Action 14 Minimum Standard through the ratification of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). Hong Kong indicated that Mainland China expects the ratification process of the MLI to be finalized during 2022.

Please refer to this Hong Kong Tax alert for details and its implications for Hong Kong.