Hong Kong is NOT a non-cooperative tax jurisdiction
On 17 June 2015, the European Commission published a list of third country (i.e. non-EU) non-cooperative tax jurisdictions (the pan-EU blacklist). The pan-EU blacklist consists of 30 jurisdictions, including Hong Kong. However, it is not absolutely clear as to the criteria upon which Hong Kong is included in the pan-EU blacklist and what the consequences are for being included in the list.
Indeed, there are various grounds to support that Hong Kong is not a non-cooperative jurisdiction or a harmful tax regime. Hong Kong’s continuous effort in concluding more tax treaties / TIEAs with other countries and maintaining an ongoing dialogue with the international community to keep them abreast of Hong Kong’s commitments and efforts on tax co-operation should help defending Hong Kong as a tax cooperative jurisdiction.
For international investors / multinational companies using Hong Kong as an investment holding / financing / licensing location, they should review and assess their current structures/arrangements and be prepared to demonstrate that the Hong Kong company is set up with commercially justifiable reasons, there is sufficient substance in the Hong Kong company, and adequate supporting documentation is in place to substantiate the proper transfer pricing policies for the related party transactions conducted by the Hong Kong company.
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