P. 8
South China Business Journal

Photo from Action Plan
in China and
Hong Kong

- Impact Assessment for Foreign Enterprises

In October 2016, Hong Kong’s government issued a con- The consultation paper outlines key areas of the BEPS package
sultation paper for implementing measures to counter base that will be given priority for implementation, namely:
erosion and profit shifting (BEPS) in the region. • The transfer pricing regulatory regime;
• Transfer pricing documentation and country by country reporting;
BEPS refers to tax planning strategies that exploit discrepancies • Anti-treatyabuserulesincomprehensivedoubletaxagreements(CDTAs);
in tax laws in order to shift profits to jurisdictions where there • Multilateral instruments;
are lower tax rates, often tax havens. While some methods are • Statutory cross border dispute resolution mechanisms;
illegal, many are not, and can disrupt domestic market competi- • Spontaneous exchange of information (EOI) regarding tax rul-
tion and undermine taxation systems. Because of their reliance ings; and,
on income tax, BEPS is particularly relevant to developing coun- • Enhancement of the tax credit system.
tries. The Organization for Economic Co-operation and Devel-
opment (OECD) and G20 countries have formed an ‘inclusive Professional Service CB Icons 2015RELATED: Tax and
framework’, which implicates over 100 jurisdictions to coopera- Compliance Services from Dezan Shira & Associates
tively implement the OECD/G20 BEPS package, a tool that pro- Although Hong Kong will implement the four minimum stan-
vides governments with the means to tackle BEPS on domestic dards of the OECD BEPS package, and the above priority mea-
and international levels. sures, it will also maintain a simple and low tax regime. BEPS
is a more pertinent issue for Hong Kong, as the region is often
As a key member of the inclusive framework and as an interna- used as a base and gateway by multinationals to access Mainland
tional finance center, Hong Kong indicated its intent to join the China due to its legal autonomy and relative tax freedom.
OECD scheme in June 2016. The consultation paper highlights
the government’s commitment to implementing the BEPS pack- China Mainland
age consistently, marking the start of a potentially long process Though not as pressing for the Mainland, it has maintained a
of aligning its domestic tax system with the latest international positive approach to the OECD BEPS package, and is an active
tax standards. Hong Kong will do this by revising domestic laws purveyor of the scheme. China’s particular attention to the BEPS
in order to facilitate its smooth implementation, and aims to package can be put down to the country’s implementation of the
fully introduce it in the middle of this year. so called tax reform plan, which aims to reform the tax collection

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