Asia-Pacific Transfer Pricing Handbook

Chapter Seven

Hong Kong Advance Ruling Cases: Taxability of Profits

The Government of the Hong Kong Special Administrative Region (Hong Kong) has been issuing substantive advance ruling case results since 2000. Hong Kong’s Inland Revenue Department issues these advance ruling case results infrequently, issuing just 38 such results during this nearly ten-year interval. This analysis reviews the Inland Revenue Department’s taxability of business profits, together with its treatment of expense allocation and transfer pricing, as Hong Kong’s advance ruling case process reflects these results.

ADVANCE RULING PROCESS

Hong Kong’s Inland Revenue Department designed the Hong Kong advance ruling case results to provide the taxpayer with a defined area of certainty concerning the taxability of business operations. The Inland Revenue Department publishes the advance ruling case results only for general reference, similar to the Internal Revenue Service ruling process in the United States. The department cautions taxpayers not to rely heavily on these advance ruling case results. When the issue becomes the treatment of current tax results, the department will rely on the previously issued ruling only if the factual pattern is the same as in the prior ruling.

Hong Kong’s Inland Revenue Department cautions that the Hong Kong government might have changed the relevant tax provisions in the interim after the issuance of the ruling. The department acknowledges that it might have modified its relevant ...