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On October 26, Hong Kong's Government launched a public consultation on the implementation of base erosion and profit shifting (BEPS) measures proposed by the OECD.
"Hong Kong is supportive of international efforts to promote tax transparency and combat tax evasion," said Secretary for Financial Services and the Treasury K C Chan. "Implementation of measures to counter BEPS signifies our commitment to international tax co-operation."
It is noted that the top priority in the package put forward by the OECD is to monitor the implementation of four minimum standards: countering harmful tax practices, preventing treaty abuse, imposing country-by-country (CbC) reporting requirements, and improving the cross-border dispute resolution regime.
"Hong Kong will need to revise our existing tax laws to meet the [minimum] requirements of the BEPS package. In formulating our implementation strategy, we need to ensure that our model meets the international standard without compromising our simple and low tax regime," said Chan. In that respect, the Government's consultation paper confirms that it will "draw up a pragmatic strategy to implement the international requirements."
"The implementation timetable for BEPS is very tight," Chan continued. "To meet the OECD's requirement, our current target is to introduce the relevant amendment bill or bills into the Legislative Council in mid-2017." The consultation period will end on December 31, 2016.
The priority is to put in place the necessary legislative framework to update transfer pricing rules; exchange information on tax rulings; and introduce CbC reporting requirements (which are expected to capture about 150 Hong Kong enterprises under the OECD's minimum EUR750m consolidated group revenue threshold); bolster cross-border dispute resolution mechanisms; and enter into the multilateral instrument to modify bilateral tax treaties.
Finally, the paper says "while no immediate action is required for other BEPS Actions, the Government will keep in view the pace of international developments, and draw up our response plan as appropriate."
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