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Hong Kong Makes Transfer Pricing Compliance High Priority

1st June 2022

It’s no secret that over the last few years, transfer pricing compliance has been a growing priority for Hong Kong’s Inland Revenue Department (IRD). In 2018, the IRD enacted transfer pricing documentation legislation, which includes preparing the master file, local file, and a country-by-country report. (Given Hong Kong’s high thresholds, though, the requirements target mostly large taxpayers.) Then in September 2020, the IRD issued another compliance layer: Form 1475. The document asks certain taxpayers to list details about their transfer pricing transactions. The IRD plans to make good use of that document. In the recently published minutes from the 2021 annual meeting between the Hong Kong Institute of Certified Public Accountants and the IRD, the tax authority revealed plans to conduct regular desk-based reviews and transfer pricing audits to ensure that taxpayers are complying with Hong Kong’s transfer pricing legislation. Which tool will they use to assess high-risk taxpayers? Form 1475, of course.