Inland Revenue (Amendment) (No.6) Bill 2017 (the Bill) was gazetted on 29 December 2017. The Bill seeks to (1) introduce a transfer pricing (TP) regulatory regime and mandatory TP documentation requirement in Hong Kong, (2) implement the various minimum standards under the OECD’s BEPS Action Plan and (3) revise the fees for applying for advance ruling.
The key BEPS-related provisions in the Bill other than those related to TP regulatory regime and documentation mainly seek to: (1) put in place an effective and efficient statutory dispute resolution mechanism by requiring the CIR to give effect to mutual agreements made with other treaty jurisdictions under the Mutual Agreement Procedure or arbitration process of a tax treaty; (2) clarify the double tax reliefs available in the absence or in presence of a tax treaty; (3) extend the time limit of making a fresh foreign tax credit (FTC) claim from two years to six years after the end of relevant year of assessment; (4) remove the ring-fencing features in the existing concessionary tax regimes for corporate treasury centres (CTCs), reinsurance businesses and captive insurance businesses and (5) empower the CIR to prescribe a threshold requirement for determining whether profits producing activities are carried out in Hong Kong in respect of existing concessionary tax regimes.
The gazette of the draft BEPS legislation means Hong Kong is a step closer to the implementation of the various minimum standards under the OECD’s BEPS package. The Bill is scheduled to be introduced into the Legislative Council on 10 January 2018. Despite it is expected that it will take at least a few months before the Bill can be enacted into law, companies should definitely be assessing the potential impacts of the proposed legislative changes in the Bill on their existing holding structures and business operations and stay tuned of the upcoming further development in this area.