On July 4, 2018, the Hong Kong Inland Revenue Department (IRD) released their guidance on the country-by-country (CbC) reporting requirements of entities that are resident in Hong Kong. The implementation framework for CbC reporting is provided under the Inland Revenue (Amendment) (No. 6) Bill 2017.
This Alert sets out the notification and/or reporting requirements of a Multinational Enterprise (MNE) group. The requirements for filing a CbC return, which includes a CbC report, only apply to a MNE group whose annual consolidated group revenue reaches the specified threshold amount i.e. HK$6.8 billion (referred to as the Reportable Group).
A constituent entity of a Reportable Group that is resident for tax purposes in Hong Kong must submit the CbC notification to the IRD within three months of the accounting year-end date of the reportable MNE group. This is applicable for all accounting periods commencing from January 1, 2018. Specifically, taxpayers with a fiscal year ended December 31 must submit the CbC notification by 31 March, 2019.
If the ultimate parent entity of the Reportable Group is resident in Hong Kong, it is also mandatory to file a CbC report in Hong Kong. Otherwise, a constituent entity may be required to file a CbC report when the ultimate or surrogate parent entity has not filed one in their own tax jurisdiction; it is mandatory to file in case the IRD is unable to access the CbC report in the parent entity’s jurisdiction due to a lack of exchange agreement or systemic failure in exchanging the CbC report. In both cases, the CbC report must be filed in the prescribed XML schema format within 12 months of the accounting year-end date of the Reportable Group, commencing from January 1, 2018.
View detailed guidance and the notification process.
Therefore, MNE groups with subsidiaries in Hong Kong, or with an ultimate parent entity in Hong Kong, should act now to ensure their CbC notification and reporting requirements in Hong Kong are satisfied.
The Duff & Phelps Transfer Pricing practice currently assists a variety of multinational groups with their CbC notification and reporting obligations in Hong Kong. For further information and assistance, please contact your Duff & Phelps advisor.
