May 2009, Issue 4
Guidance on granting relief from double taxation
With increasing cross-border operations, especially those with China, there has been a call for practical guidance from the Hong Kong Inland Revenue Department ("IRD") in dealing with double taxation issues, especially those arising from transfer pricing adjustments. On 30 April 2009, the IRD issued the long-awaited Departmental Interpretation and Practice Notes No. 45 - "Relief from Double Taxation due to Transfer Pricing or Profit Reallocation Adjustments" ("DIPN 45"). DIPN 45 is generally welcomed as providing a formal IRD view on how relief from double taxation may be obtained and the detailed procedures involved for taxpayers in seeking relief under a double taxation agreement ("DTA").
In this issue of News Flash, we are going to discuss the details of DIPN 45 and our observations on its implications. Before looking into the details of DIPN 45, one key "big picture" message coming out from the issue of DIPN 45, as well as another forthcoming DIPN on wider transfer pricing issues, is that transfer pricing is definitely on the IRD's agenda and it is time for companies with cross-border operations to reconsider both their transfer pricing housekeeping, and the risks and opportunities in their existing operations.
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