Latest Tax Analysis

Hong Kong passes BEPS and Transfer Pricing laws

H83/2018 – 13 July 2018

Hong Kong's Legislative Council on 4 July 2018 passed the Inland Revenue (Amendment) (No. 6) Bill 2017 (Amendment Bill), which comes into force on 13 July after being signed by the Chief Executive and published in the Gazette. The passing of the Amendment Bill completes the long awaited codification of Hong Kong's transfer pricing (TP) laws, and affirms Hong Kong's commitment to implement OECD's Base Erosion and Profit Shifting (BEPS) initiatives. The Amendment Bill has been amended since the draft that was issued in December 2017 (see our Tax Analysis on the original draft bill here), with a number of amendments made through the Bills Committee Stage, in response to comments received from submitters on the original draft. The Amendment Bill will not be the last word on Hong Kong's TP regulations – the Report of the Bills Committee on this Bill has identified several areas for which further guidance would be issued by the Inland Revenue Department (IRD) through Departmental Interpretation and Practice Notes (DIPN) . These are expected to be issued within the coming months, and we will issue tax newsletters on these once they are released.

Our comments are focused on the key changes since that original draft – as well as important points that businesses should pay attention to as they consider the implications of the changes, and plan for future regulatory compliance.

Year 2018

H83/2018 – 13 July 2018
Hong Kong passes BEPS and Transfer Pricing laws
[English]

H82/2018 – 4 May 2018
Enhanced deduction for R&D expenditures introduced
[English] [Simplified Chinese]

H81/2018 – 18 April 2018
Proposed expansion of deduction for purchase of intellectual property rights
[English] [Simplified Chinese]

P274/2018 – 6 April 2018
Guidance issued on new VAT rate reductions and changes relating to small-scale VAT payers
[English] [Simplified Chinese] [Japanese]

P273/2018 – 8 March 2018
Customs credit management system revised
[English] [Simplified Chinese] [Japanese]

H80/2018 – 28 February 2018
2018/19 Budget analysis
A holistic budget with forward-looking vision
[English] [Simplified Chinese]

H79/2018 – 27 February 2018
Employer-employee relationship
[English] [Simplified Chinese]

P271/2018 – 23 February 2018
SAT updates guidance on interpretation of tax treaties
[English] [Simplified Chinese] [Japanese]

P270/2018 – 8 February 2018
SAT published new rules on beneficial owners
[English] [Simplified Chinese] [Japanese]

H78/2018 – 6 February 2018
Permanent Establishments
[English]

P269/2018 – 17 January 2018
SAT issues guidance on registration of general VAT payers
[English] [Simplified Chinese] [Japanese]

P268/2018 – 10 January 2018
Tariff adjustments for 2018 announced
[English] [Simplified Chinese] [Japanese]

H77/2018 – 8 January 2018
Hong Kong to introduce statutory transfer pricing regime
[English] [Simplified Chinese] [Japanese]

H76/2018 – 5 January 2018
Two-tiered profits tax rates regime introduced in Hong Kong
[English] [Simplified Chinese]

Year 2017

P265/2017 – 27 October 2017
New guidance clarifies rules relating to EIT withholding on China-source income derived by nonresident enterprises
[English] [Simplified Chinese] [Japanese]

H75/2017 – 1 August 2017
Hong Kong signs multilateral instrument to modify bilateral tax agreements
[English] [Simplified Chinese]

P264/2017 – 1 August 2017
China signs MLI to modify tax treaties
[English] [Simplified Chinese] [Japanese]

P263/2017 – 28 July 2017
New VAT guidance issued on industry-specific issues
[English] [Simplified Chinese] [Japanese]

P262/2017 – 3 July 2017
VAT on asset management products postponed
[English] [Simplified Chinese] [Japanese]

P261/2017 – 28 June 2017
SAT strengthens management of VAT general invoices
[English] [Simplified Chinese] [Japanese]

P260/2017 – 1 June 2017
Consequences of reduction in VAT rate bands
[English] [Simplified Chinese] [Japanese]

P259/2017 – 22 May 2017
China CRS rules apply as from 1 July 2017    
[English] [Simplified Chinese] [Japanese]

P258/2017 – 31 March 2017
SAT issued new rules to improve administration of special tax investigation and adjustment and mutual agreement procedures 
[English] [Simplified Chinese] [Japanese]

H74/2017 – 28 March 2017
Oops!…They did it again
Hong Kong's aircraft leasing bill
[English] [Simplified Chinese]

H73/2017 – 22 February 2017
2017/18 Budget Analysis
Comprehensive, but cautious budget with commitment to review long-term tax policy
[English] [Simplified Chinese]

P256/2017 – 26 January 2017
Government authorities coordinate to offer joint incentives for customs advance certified enterprises
[English] [Simplified Chinese] [Japanese]

H72/2016 – 16 January 2017
Financial Institutions: Practice versus Law and Foreign Tax Credits?
[English] [Simplified Chinese]

P255/2016 – 10 January 2017
SAT clarifies post-VAT reform land appreciation tax issues
[English] [Simplified Chinese] [Japanese]

Year 2016

P254/2016 – 27 December 2016
New VAT guidance addresses industry-specific issues
[English] [Simplified Chinese] [Japanese]

H71/2016 – 16 December 2016
Hong Kong Consultation on measures against BEPS
[English] [Simplified Chinese] [Japanese]

P253/2016 – 13 December 2016
GAC issues 2017 edition of Harmonized System Nomenclature
[English] [Simplified Chinese] [Japanese]

P252/2016 – 22 November 2016
Update on export tax refunds: Revised guidance on administrative classification of export enterprises
[English] [Simplified Chinese] [Japanese]

P251/2016 – 7 November 2016
Chinese customs authorities issue updated guidance on customs audits
[English] [Simplified Chinese] [Japanese]

P250/2016 – 28 October 2016
Comprehensive resource tax reform kicked off in China - Water resource tax piloted in Hebei province
[English] [Simplified Chinese] [Japanese]

P248/2016 – 18 October 2016
SAT issued new rules to improve administration of advance pricing arrangements
[English] [Simplified Chinese] [Japanese]

P247/2016 – 17 October 2016
State Administration of Taxation ("SAT") released draft "Due Diligence Procedures on Financial Account Information in Tax Matters for Non-residents" Are you ready?
[English] [Simplified Chinese]

P245/2016 – 28 September 2016
Favorable tax treatment extended to more equity compensation plans / contributions of technology
[English] [Simplified Chinese]

P244/2016 – 8 September 2016
VAT Reform - SAT clarifies disputed VAT issues
[English] [Simplified Chinese] [Japanese]

P243/2016 – 8 August 2016
Chinese court rules offshore merger by absorption does not qualify for special reorganization relief
[English] [Simplified Chinese] [Japanese]

P242/2016 – 4 August 2016
New China - Germany agreement on the avoidance of double taxation and the prevention of fiscal evasion
[English] [Simplified Chinese]

P241/2016 – 13 July 2016
SAT issued new rules on reporting of related party transactions and contemporaneous documentation
[English] [Simplified Chinese] [Japanese]

P240/2016 – 27 May 2016
VAT Reform – SAT promulgated interim measures related to real estate and construction sectors
[English] [Simplified Chinese] [Japanese]

P238/2016 – 6 April 2016
VAT Reform – SAT promulgated interim measures related to real estate and construction sectors
[English] [Simplified Chinese] [Japanese]

H70/2016 – 6 April 2016
Impact of BEPS Action 6 on source-based tax jurisdictions: the case of Hong Kong
[English] [Simplified Chinese]

P236/2016 – 2 April 2016
VAT Reform - Construction sector
[English] [Simplified Chinese] [Japanese]

P235/2016 – 30 March 2016
VAT Reform - Lifestyle services sector
[English] [Simplified Chinese] [Japanese]

P234/2016 – 29 March 2016
VAT Reform - Financial services sector
[English] [Simplified Chinese] [Japanese]

P233/2016 – 31 March 2016
VAT Reform - Real estate sector  
[English] [Simplified Chinese] [Japanese]

P232/2016 – 24 March 2016
MOF and SAT announced detailed rules for VAT Reform rollout to cover all industries 
[English] [Simplified Chinese] [Japanese]

H69/2016 – 16 March 2016
Potential impact of proposed Regulatory Capital Securities tax legislation to Hong Kong financial institutions
[English] [Simplified Chinese]

H68/2016 – 24 February 2016
2016/17 Budget Analysis - Commitment to long-term growth, but lack of exciting relief measures
[English] [Simplified Chinese]

H67/2016 – 20 January 2016
IRD partially clarifies tax treatment of court-free amalgamations
[English] [Simplified Chinese]

Year 2015

H66/2015 – 11 December 2015
Hong Kong aims to sharpen its competitive edge with new corporate treasury centre tax regime
[English] [Simplified Chinese]

H65/2015 – 18 November 2015
Hong Kong profits tax exemption for private equity funds: Now a reality
[English] [Simplified Chinese]

P231/2015 – 16 November 2015
Results of high and new technology enterprise status verification announced
[English] [Simplified Chinese] [Japanese]

P230/2015 – 15 October 2015
BEPS action 7: Preventing the artificial avoidance of PE status
[English] [Simplified Chinese] [Japanese]

P229/2015 – 7 October 2015
Final BEPS reports released: An overall perspective
[English] [Simplified Chinese] [Japanese]

P228/2015 – 22 September 2015
Mainland China and Taiwan sign tax agreement
[English] [Simplified Chinese] [Japanese]

P227/2015 – 21 September 2015
SAT issues new rules for claiming treaty benefits
[English] [Simplified Chinese] [Japanese]

P226/2015 – 21 September 2015
Discussion draft of "Implementation Measures of Special Tax Adjustment" released by the China's State Administration of Taxation
[English] [Simplified Chinese] [Japanese]

P225/2015 – 13 August 2015
China issues regulations on cost sharing agreements
[English] [Simplified Chinese] [Japanese]

P224/2015 – 6 August 2015
Free trade agreement signed with Australia
[English] [Simplified Chinese]

P223/2015 – 27 July 2015
BEPS Actions 8, 9 and 10: Transfer pricing update
[English] [Simplified Chinese] [Japanese]

H64/2015 – 22 July 2015
A Hong Kong perspective on the EU efforts to prevent harmful tax competition
[English] [Simplified Chinese]

P222/2015 – 17 July 2015
SAT issues guidance on tax administration of enterprise reorganizations
[English] [Simplified Chinese] [Japanese]

P221/2015 – 15 July 2015
SAT issues new guidance on special tax treatment on intragroup assignment of shares or assets
[English] [Simplified Chinese] [Japanese]

P220/2015 – 14 July 2015
BEPS Action 7: OECD releases revised discussion draft on definition of permanent establishment
[English] [Simplified Chinese] [Japanese]

P219/2015 – 26 June 2015
BEPS Action 13: Country-by-country reporting implementation package
[English] [Simplified Chinese] [Japanese]

P218/2015 – 19 June 2015
BEPS Action 8: OECD issues discussion draft on hard-to-value intangibles
[English] [Simplified Chinese] [Japanese] 

P217/2015 – 18 May 2015
Individual income tax treatment of contribution of nonmonetary assets clarified
[English] [Simplified Chinese] [Japanese]

P216/2015 – 13 May 2015
BEPS Action 8: OECD releases draft guidance on cost contribution arrangements
[English] [Simplified Chinese] [Japanese]

H63/2015 – 12 May 2015
Update on proposed Hong Kong profits tax exemption for private equity funds
[English] [Simplified Chinese] 

H62/2015 – 21 April 2015
New protocol for Hong Kong-China double taxation arrangement signed
[English] [Simplified Chinese]

P215/2015 – 9 April 2015
SAT releases new bulletin to strengthen Transfer Pricing administration on Intra-group outbound charges 
[English] [Simplified Chinese] [Japanese]  

P214/2015 – 11 March 2015
China-Korea Free Trade Agreement – One of the most popular potential FTA
[English] [Simplified Chinese] 

H61/2015 – 25 February 2015
2015/16 Budget Analysis: Comprehensive budget with diverse initiatives but housing measures are fewer than expected
[English] [Simplified Chinese] [Traditional Chinese]

P213/2015 – 13 February 2015
BEPS Action 13: OECD issues guidance on CbC reporting implementation
[English] [Simplified Chinese] [Japanese] 

P212/2015 – 6 February 2015
SAT issues new rules on indirect transfers of assets by nonresident enterprises
[English] [Simplified Chinese] [Japanese] 

P211/2015 – 4 February 2015
BEPS Action 10: Discussion draft on the use of profit splits in the context of global value chains
[English] [Simplified Chinese] [Japanese]  

P210/2015 – 30 January 2015
BEPS Actions 8, 9, and 10: Discussion draft on revisions to chapter I of the transfer pricing guidelines (including risk, recharacterization, and special measures)
[English] [Simplified Chinese] [Japanese]  

P209/2015 – 23 January 2015
BEPS Action 14: Make dispute resolution mechanisms more effective
[English] [Simplified Chinese] [Japanese] 

P208/2015 – 21 January 2015
BEPS Action 4: Discussion draft released on deductibility of interest expense
[English] [Simplified Chinese] [Japanese]

P207/2015 – 19 January 2015
BEPS Action 10: Discussion draft on the transfer pricing aspects of cross-border commodity transactions
[English] [Simplified Chinese] [Japanese]

P206/2014 – 16 January 2015
OECD Issues BEPS Transfer Pricing Discussion Drafts
[English] [Simplified Chinese] [Japanese] 

H60/2015 – 13 January 2015
Hong Kong courts rule lump sum received on termination of contract not taxable
[English] [Simplified Chinese] 

Year 2014

P205/2014 – 30 December 2014
SAT issues guidance on tax treatment of share transfers by individuals
[English] [Simplified Chinese] [Japanese] 

P204/2014 – 29 December 2014
China tariff policy for 2015 announced
[English] [Simplified Chinese] [Japanese]  

P203/2014 – 19 December 2014
SAT issues regulations on the application of the GAAR 
[English] [Simplified Chinese] [Japanese]

P202/2014 – 14 November 2014
BEPS Action 10:  Proposed modifications to transfer pricing guidelines relating to low value-adding intragroup services
[English] [Simplified Chinese] [Japanese]

P201/2014 – 7 November 2014
BEPS Action 7: Preventing the artificial avoidance of PE status
[English] [Simplified Chinese] [Japanese]

P200/2014 – 15 October 2014
BEPS Action 2: Hybrid mismatch arrangements
[English] [Simplified Chinese] [Japanese]

P199/2014 – 29 September 2014
OECD Release on Intangibles: Many issues unanswered
[English] [Simplified Chinese] [Japanese]

P198/2014 – 29 September 2014
OECD releases the BEPS Project 2014 deliverables
[English] [Simplified Chinese] [Japanese] 

P197/2014 – 29 September 2014
OECD Chapter I Release: Important guidance on location-specific advantages and passive association
[English] [Simplified Chinese] [Japanese]

P196/2014 – 26 September 2014
BEPS Action 15: Developing a multilateral instrument to modify bilateral tax treaties
[English] [Simplified Chinese] [Japanese]

P195/2014 – 25 September 2014
BEPS Action 6: Preventing the granting of treaty benefits in inappropriate circumstances
[English] [Simplified Chinese] [Japanese]

P194/2014 – 24 September 2014
OECD Release on Transfer Pricing Documentation: The new global standard
[English] [Simplified Chinese] [Japanese]

H59/2014 – 6 August 2014
Hong Kong signs first tax information exchange agreement
[English] [Simplified Chinese]

P193/2014 – 11 July 2014
Transfer Pricing and ‘High and New Technology Enterprises’ in China: What you need to know
[English] [Simplified Chinese] [Japanese]

H58/2014 – 16 June 2014
Proposal to extend Hong Kong’s offshore fund exemption to private equity: A step in the right direction
[English] [Simplified Chinese]

P192/2014 – 21 May 2014
BEPS Action 6: Preventing the granting of treaty benefits in inappropriate circumstances
[English] [Simplified Chinese] [Japanese]

P191/2014 – 13 May 2014
BEPS Action 2: Hybrid mismatch arrangements
[English] [Simplified Chinese] [Japanese]

P190/2014 – 12 May 2014
BEPS Action 1: Tax challenges of the digital economy
[English] [Simplified Chinese] [Japanese]

H57/2014 – 25 March 2014
Hong Kong’s new Companies Ordinance creates opportunities for tax-free amalgamations
[English] [Simplified Chinese] [Japanese]

H56/2014 - 17 March 2014
Newly published advance ruling takes a hard line in determining the locality of profits
[English] [Simplified Chinese] [Japanese]

H55/2014 - 26 February 2014
2014/15 Hong Kong Budget Analysis: Visionary budget, cutting down "sweeteners" and few tax measures for individuals
[English] [Simplified Chinese] [Japanese]

H54/2014 - 26 February 2014
2014/2015 Hong Kong SAR Budget Highlights - Summary of allowances, deductions & tax rates
[English] [Simplified Chinese] [Japanese]

P189/2014 - 29 January 2014
New China-UK tax treaty enters into force
[English] [Simplified Chinese] [Japanese]

Year 2013

H53/2013 - 20 December 2013
Update on Inland Revenue Department's views on tax treatment of share-based payment transactions: Opportunities and uncertainties
[English] [Simplified Chinese] [Japanese]

P188/2013 - 19 December 2013
MOF and SAT issue new VAT reform rules
[English] [Simplified Chinese] [Japanese]

H52/2013 - 22 November 2013
Hong Kong CFA holds unrealized gains not chargeable to profits tax
[English] [Simplified Chinese] [Japanese]

P187/2013 - 9 October 2013
SAT issues guidance on application of VAT exemption treatment
[English] [Simplified Chinese] [Japanese]

P186/2013 - 27 September 2013
China (Shanghai) Pilot Free Trade Zone: Open for Business
[English] [Simplified Chinese] [Japanese]

P185/2013 - 6 September 2013
SAT issues guidance on application of zero-rated VAT treatment
[English] [Simplified Chinese] [Japanese]

H51/2013 - 22 August 2013
Development of Islamic finance in Hong Kong
[English] [Simplified Chinese]

P184/2013 - 26 July 2013
China relaxes foreign exchange procedures on outbound payments for trade in services
[English] [Simplified Chinese] [Japanese]

P183/2013 - 3 June 2013
MOF and SAT issue new regulations on nationwide implementation of VAT reform on transportation and modern services sectors
[English] [Simplified Chinese] [Japanese]

P182/2013 - 27 May 2013
New Guidance Clarifies IIT Treatment of POst-Acquitsition Capitalization of Undistributed Profits or Reserves
[English] [Simplified Chinese] 

P181/2013 - 17 May 2013
SAT clarifies when a secondment arrangement creates a PE
[English] [Simplified Chinese] [Japanese]

P180/2013 - 8 May 2013
SAT issues guidance on beneficial ownership of dividends under tax arrangement with Hong Kong
[English] [Simplified Chinese] [Japanese] 

H50/2013 – 27 February 2013
2013/14 Budget Analysis: Compassionate, pragmatic and cautious with clear positioning of Hong Kong
[English] [Simplified Chinese] [Japanese]

P179/2013 - 4 February 2013
SAT further clarifies EIT filing requirements for enterprises with branches
[English] [Simplified Chinese] [Japanese]

P178/2013 - 24 January 2013
SAT updates guidance on application of capital gains article in China’s tax treaties
[English] [Simplified Chinese] [Japanese]

P177/2013 –17 January 2013
SAFE simplifies rules on administration of foreign exchange for direct investment
[English] [Simplified Chinese] [Japanese]

H49/2013 – 4 January 2013
Hong Kong court disallows deduction for manufacturing assets used in China
[English] [Simplified Chinese] [Japanese]