Hong Kong: Announcement on Country-by-Country Reporting Released

On 22 December 2016, the Inland Revenue Department published on its website an announcement on country-by-country (CbC) reporting. The announcement provides information on:

• what CbC reporting is;
• the reporting entities;
• the filing deadline;
• the implementation in Hong Kong; and
• the transitional arrangement.

In respect of the transitional arrangement, the announcement states the following: Some tax jurisdictions have introduced CbC reporting since the accounting period commencing on 1 January 2016. To facilitate MNE (multinational enterprise) groups of which the ultimate parent entities are tax residents in Hong Kong (Hong Kong MNE Groups) to fulfil their CbC reporting obligations in those jurisdictions, the Department is prepared to accommodate parent surrogate filing as a transitional arrangement.

Under this transitional arrangement, a Hong Kong MNE Group will be allowed to file its CbC reports for the accounting periods commencing between 1 January 2016 and 31 December 2017 to the Department for exchange with other tax jurisdictions. Parent surrogate filing is entirely voluntary and may relieve the group's constituent entities from local filing obligations provided that:

• the required legal framework will have been put in place in Hong Kong by 31 December 2017;
• qualifying competent authority agreements will have come into effect between Hong Kong and the tax jurisdictions concerned by 31 December 2017;
• the Department has been notified that the CbC reports will be filed by the deadline which is to be provided under the legal framework; and
• the competent authorities of the tax jurisdictions in which the constituent entities are resident, if required, have been notified that the CbC reports will be filed to the Department by the deadline prescribed under the domestic legislation of the jurisdictions.

The Department is now formulating the procedures for the arrangement which will be rolled out in the first quarter of 2017. Meanwhile, the ultimate parent entity of Hong Kong MNE Group seeking parent surrogate filing in Hong Kong should submit a notification, duly signed by its director, secretary or responsible officer, to the Department containing the following information:
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• the name of the ultimate parent entity;
• the Hong Kong business registration number of the ultimate parent entity;
• the accounting period(s) for which the group's CbC report(s) will be filed to the Department;
• a list showing the name, tax identification number and jurisdiction of tax residence (relevant jurisdiction) of each of the constituent entities to be included in the CbC report; and
• a consent given to the Department to inform the relevant jurisdictions of the ultimate parent entity's agreement to perform parent surrogate filing in Hong Kong.

The notification should be submitted by post to:
Chief Assessor (Tax Treaty)
G.P.O. Box No. 10856
Hong Kong 
(Re: Country-by-country reporting)
The notification in the form of an electronic record may also be sent by email to [email protected]. Hong Kong MNE Groups should take note that the transitional arrangement may not relieve their obligations in all jurisdictions since local filing requirements could vary in different jurisdictions.

The full text of the announcement can be found at: http://www.ird.gov.hk/eng/tax/dta_cbc.htm.