Understanding the IRD's views on emerging corporate tax issues, in particular the practice on processing Hong Kong tax resident certificate applications
In the 2015 annual meeting between the Inland Revenue Department (IRD) and the Hong Kong Institute of Certified Public Accountants (HKICPA), the IRD expressed its views on various emerging tax issues in the domestic as well as cross-border context. This News Flash summarises the more important profits tax and international tax issues for corporations discussed in the meeting, including: (1) taxation of royalties from licensing of intellectual property rights (IPRs); (2) the IRD's assessment of Hong Kong tax resident certificate (HKTRC) applications; (3) application of tax treaties to non-resident partnerships; (4) foreign tax credit claims of Hong Kong branches of overseas banks and (5) Hong Kong's responses to the Organisation for Economic Cooperation and Development (OECD)'s Base Erosion and Profit Shifting (BEPS) project.
While the meeting minutes are not law and are not legally binding, the minutes serve as a good reference of the IRD's stance on various emerging tax issues. In particular, this year's minutes have shed some light on the impacts of the BEPS project on the tax regime in Hong Kong, which are mainly in the areas of consideration of corporate tax incentives, preventing treaty abuse and transfer pricing. Companies with business operations in Hong Kong or doing business with Hong Kong should take into account the views expressed by the IRD in the meeting minutes in both of their tax planning and tax filing processes for an effective management of their tax matters.
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