On 15 July 2020, the Inland Revenue Department (IRD) released the revised Departmental Interpretation and Practice Notes No. 48 (Revised DIPN 48). The revision (click here) mainly serves to: (a) reflect the legislative changes made by the Inland Revenue (Amendment) (No. 6) Ordinance 2018 in relation to the statutory advance pricing arrangement (APA) regime in Hong Kong; and (b) explain the streamlined APA process.
Key revisions in DIPN 48 include the following:
Summary of the 3-stage APA process
The Revised DIPN 48 reflects the IRD’s commitment to further developing the APA program in Hong Kong. This is a welcome act given the significant increase in transfer pricing controversies internationally as well as locally since the OECD’s action plan against Base Erosion and Profit Shifting (BEPS) was introduced. The indicators provided in the Revised DIPN 48 with respect to suitability of concluding APAs allow taxpayers to better evaluate the feasibility of a potential APA before initiating the process.
With these updates to the APA program, the Revised DIPN 48 offers taxpayers an improved avenue to lock in their transfer pricing positions in Hong Kong and counterparty jurisdictions and can thereby help to resolve any existing controversies with which they are dealing.
Where required, taxpayers should seek professional advice during this process to ensure an all-rounded assessment is conducted.