Frequently Asked Questions for the implementation of Country-by-Country Reporting in Hong Kong-Company Formation_Trademark Registration_Tax Service - Hong Kong CPA

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Frequently Asked Questions for the implementation of Country-by-Country Reporting in Hong Kong

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The Inland Revenue (Amendment) (No. 6) Bill 2017 was published in the Gazette on 29 December 2017 and was passed by the Legislative Council (LegCo) on 4 July 2018. The Inland Revenue (Amendment) (No. 6) Ordinance 2018 subsequently became effective on 13 July 2018 to provide the implementation framework for CbC Reporting in Hong Kong. The following are frequently asked questions for the implementation:

Q:	What is Country-by-Country Reporting?
A：	Action 13 of the Base Erosion and Profit Shifting Package established by the Organisation for Economic Co-operation and Development introduces Country-by-Country (“CbC”) Reporting. Under this standard, a multinational enterprise group (“MNE Group”) is required to file a CbC Report in relation to an accounting period where: the consolidated group revenue for the preceding accounting period is at least EUR750 million (or HK$6.8 billion); and the group has constituent entities or operations in two or more jurisdictions.
Q:	What information should be included in CbC Report?
A：	Apart from MNE Group’s aggregate tax jurisdiction-wide information, CbC Report also requires MNE Group to declare a list of all the constituent entities. The aggregate tax jurisdiction-wide information includes the global allocation of the income, the taxes paid, and certain indicators of the location of economic activities among tax jurisdictions in which the MNE Group operates, while the list of constituent entities should include the jurisdictions of incorporation of each of the constituent entities if different from the tax jurisdiction of residence and the major business activities carried out by the entities.
Q:	Who is required to file CbC Return?
A：	For the MNE Group that meets the above specified threshold amount ("Reportable Group"), its ultimate parent entity (“UPE”) resident in Hong Kong ("HK UPE") has the primary obligation of filing a CbC Return. For each accounting period beginning on or after 1 January 2018, the HK UPE must file a CbC Return.
Q:	If the ultimate parent entity of a Reportable Group is not resident in Hong Kong, will the other Hong Kong group companies be required to file CbC Return?
A：	If the UPE of a Reportable Group is not resident in Hong Kong, one of its Hong Kong Entities will be subject to a secondary obligation of filing a CbC Return if any of the following conditions is met: the UPE is not required to file a CbC Report in its jurisdiction of tax residence; there has been a systemic failure to exchange CbC Reports by the tax jurisdiction in which UPE operates, which has been notified to the Hong Kong Entity by the Commissioner; there is agreement regarding automatic exchange of tax information between UPE’s tax jurisdiction and Hong Kong, but no exchange arrangement in place between the jurisdiction and Hong Kong for CbC Reports by the deadline for filing the CbC Return. However, the Hong Kong Entity can be exempted from secondary obligation of filing a CbC Return if: another Hong Kong Entity of the Reportable Group files a CbC Return for the relevant accounting period; or the Reportable Group has authorized a constituent entity as its surrogate parent entity (“SPE”) to file CbC Report on behalf of the group, and the CbC Report is filed by the SPE in Hong Kong or a jurisdiction which has an exchange arrangement in place with Hong Kong.
Q:	When are the deadlines for filing CbC notification and CbC Return?
A：	Basically, each Hong Kong Entity of a Reportable Group is required to make CbC notification for the filing of CbC Return within 3 months after the end of the relevant accounting period. However, if a Hong Kong Entity belongs to a Reportable Group that has more than one Hong Kong Entity, and it is not the entity which is to file a CbC Return and another Hong Kong Entity has already made the notification, then that Hong Kong Entity is not required to make CbC notification. In practice, an assessor of Hong Kong Inland Revenue Department will issue a filing notice to an entity which has made such notification or any other entity which is considered to be obliged to file a CbC Return. The deadline for filing a CbC Return is 12 months after the end of the relevant accounting period or the date specified in the assessor’s notice, whichever is the earlier.

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