Asia-Pacific Transfer Pricing Handbook

Chapter Eight

Hong Kong Transfer Pricing Guidelines

The Inland Revenue of Hong Kong issued Transfer Pricing Guidelines—Methodologies and Related Issues on December 2009, as a departmental interpretation and Practice Note No. 46. The Hong Kong Special Administrative Region (SAR) issued the transfer pricing guidelines for the benefit of taxpayers and their tax representatives, thus suggesting that Inland Revenue had preserved other nonpublic advice for the tax collector itself. Nevertheless, the transfer pricing guidelines were exceedingly clear as to abusive tax schemes and the remedies to these schemes the Inland Revenue would pursue. These guidelines contain the Inland Revenue Department’s interpretations and practices in relation to Hong Kong’s transfer pricing law as of December 2009.

The Hong Kong December 2009 transfer pricing guidelines follow closely the Organisation for Economic Co-operation and Development (OECD) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, as revised earlier in 2009. The audit practices followed by the Inland Revenue Department, as a general matter, do not differ from the transfer pricing methodologies recommended in the OECD guidelines. Nevertheless, there are significant issues of departure from the OECD Transfer Pricing Guidelines within the Hong Kong transfer pricing guidelines.

There are five differences between the OECD Transfer Pricing Guidelines and the Hong Kong transfer pricing guidelines. The Hong Kong ...