The Inland Revenue Department (IRD) on 15 July 2020 released guidance concerning advance pricing arrangement (APA) procedures.
The guidance—Departmental Interpretation and Practice Notes No. 48 (DIPN 48)—reflects the legislative changes in relation to the APA regime in Hong Kong and explains the streamlined APA process.
Key revisions in DIPN 48 concern the following:
Tax professionals view DIPN 48 as reflecting the IRD’s commitment to further developing the APA program in Hong Kong and a response to the increase in transfer pricing controversies internationally as well as domestically following the OECD’s action plan addressing base erosion and profit shifting (BEPS). The indicators provided in DIPN 48 with respect to suitability of concluding APAs may allow taxpayers to better evaluate the feasibility of a potential APA before initiating the process. With these updates to the APA program, DIPN 48 is viewed as offering taxpayers an opportunity to lock in their transfer pricing positions in Hong Kong and counterparty jurisdictions and may thereby help resolve controversies.
Revised DIPN 47
The IRD also on 15 July 2020 released the revised DIPN 47 that includes the “Convention on Mutual Administrative Assistance in Tax Matters” as one of the instruments for the exchange of information with other jurisdictions. The declaration for extending the application of the Convention to Hong Kong was registered at the OECD in May 2018, and the Convention entered into force in Hong Kong on 1 September 2018. The revised DIPN 47 reflects the latest international standard of exchange of information on request.
For more information, contact the Global Leader of KPMG’s Global Transfer Pricing Services:
Komal Dhall | +1 212 872 3089 | email@example.com
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