Transfer pricing in Hong Kong

Transfer pricing in Hong Kong at a glance

Regulation Type National regulations based on OECD
Are there specific transfer pricing regulations? Yes
Submission deadline N/A
Submission deadline upon request 30 days
Annual update required No
Official language requirements Chinese and English accepted
Potential impact of penalties N/A

Hong Kong tax law

Rules for transfer pricing in Hong Kong are based upon:

  • Section 17 of the IRO on prohibited deductions
  • Section 20 of the IRO on basis for taxation of closely connected non-resident persons
  • Section 61A of the IRO on transactions designed to avoid tax liability
  • Section 16 of the IRO on deductibility of expenses in arriving at assessable profits.


Departmental Interpretation and Practice Notes 46 (DIPN) is largely based on the OECD Guidelines, and it is stated that the practice followed by the Inland Revenue Department (IRD) will, in general, not deviate from recommended transfer pricing methods by the OECD.


Accepted methods are:

  • The comparable uncontrolled price method
  • the resale price method
  • the cost plus method
  • the profit split method
  • the transactional net margin method
  • and other methods if adequately supported

The IRD do, in general, accept the most appropriate method. Additionally, the IRD do prefer transaction-based methods over profit-based methods when they can be applied in an equally reliable manner.

Documentation requirements

Information that should be provided:

There is no contemporaneous transfer pricing documentation requirement in Hong Kong. However, upon an audit or investigation, the taxpayer is expected to have maintained records that have details on intercompany transactions with regard to the nature of transactions and payments made/received.


Chinese and English is in general accepted.

Preparation deadline

Not applicable.

Deadline to submit

Not applicable.

Advance Pricing Agreements


The IRD issued a new DIPN in April 2012 that allows Hong Kong to enter into bilateral and multilateral Advance Pricing Agreements (APA’s) with countries that have double tax arrangements with Hong Kong.


An APA in Hong Kong will cover a period of three to five years, and the taxpayer may request a renewal for another three to five years, but at least six months before expiration of the original APA.

DIPN 48 sets out different thresholds based on the nature of the related-party transaction to be covered by the APA, as follows:

  • HKD 80 million per year for the purchase and sale of goods
  • HKD 40 million per year for the provision of services
  • HKD 20 million per year for the use of intangible assets (for instance, a royalty).

A taxpayer’s related-party transactions must meet the relevant threshold for the category of transaction for each year covered by the APA. The IRD may consider a lower threshold in cases involving complex transactions with high transfer pricing risk.


No transfer-pricing-specific penalty is applicable. However, if there are tax evasion or tax avoidance motives, a maximum penalty of 300 percent of the tax underpaid due to the non-arm’s-length transfer pricing arrangement may be imposed.