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Hong Kong: Arrangement for automatic exchange of country-by-country reports with China

Hong Kong: Automatic exchange of CbC reports with China

Hong Kong’s Inland Revenue Department on 4 March 2020 announced that Hong Kong and China entered into an arrangement for automatic exchange of country-by-country (CbC) reports. The CbC report exchange arrangement applies retroactively to accounting periods beginning on or after 1 January 2018 (i.e., those ending on or after 31 December 2018).

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The arrangement effectively relieves Hong Kong entities of reportable groups having ultimate parent entities as tax residents of China from having to make any CbC filing in Hong Kong. These Hong Kong entities, however, must inform the Inland Revenue Department of this relief by making a filing via the CbC online portal on or before 31 March 2020.

KPMG observation

The automatic exchange of CbC reports between Hong Kong and China provides administrative relief to Hong Kong taxpayers of China-based reportable groups. Even if these taxpayers previously notified the Inland Revenue Department of their filing obligation under section 58F of the Inland Revenue Ordinance, they are now relieved from their filing obligation and can simply notify the tax department of their revised position. These taxpayers need to note the 31 March 2020 date for this action step.

The agreement provides for the exchange of information and collaboration between the tax authorities of Hong Kong and China on a more frequent and timely basis, causing allocation of profit and business activities among multinational group entities to be revealed to tax authorities—and this could result in more transfer pricing audits by both tax agencies. Accordingly, taxpayers in Hong Kong and their related-party transaction counterparties in China need to consider reviewing their current transfer pricing arrangements and to put proper documentation (Master and Local files) in place before the additional data might be presented to the tax authorities through the enhanced exchange mechanism. 


For more information, contact the Global Leader of KPMG’s Global Transfer Pricing Services:

Komal Dhall | +1 212 872 3089 | kdhall@kpmg.com

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

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