Hong Kong revises guidance on advance tax rulings

Hong Kong’s Inland Revenue Department published Departmental Interpretation and Practice Notes No. 31 (DIPN No.31) on 16 April 2020, which sets out the government’s interpretation and practice relating to advance tax rulings. It replaces guidance issued in 2011.

DIPN No. 31 incorporates the legislative changes made by the Inland Revenue (Amendment) (No. 6) Ordinance 2018, which primarily implemented the minimum standards of the OECD/G20 base erosion and profit shifting (BEPS) package, including the spontaneous exchange of tax rulings, provisions for an APA regime and advance rulings.

DIPN No. 31 specifies that Hong Kong’s tax authority will exchange rulings relating to preferential regimes, unilateral advance pricing arrangements or other cross-border unilateral rulings in respect of transfer pricing, permanent establishment rulings and related party conduit rulings.

All such rulings issued on or after 1 April 2016 are required to be exchanged within three months of the date received by a competent authority. Rulings exchanged will be protected under the tax confidentiality provisions in the relevant tax treaty or convention.

Appendix 9 of the revised DIPN No. 31 summarises the jurisdictions with which rulings should be exchanged, while Appendix 8 sets out details of the application fees.