Hong Kong has implemented Country-by-Country (CbC) reporting requirements as part of the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) Action Plan. The CbC reporting framework aims to increase transparency in international tax matters and prevent multinational corporations from shifting profits to low-tax jurisdictions. In Hong Kong, multinational corporations with annual consolidated group revenue of at least HKD 6.8 billion are required to file a CbC report.

The CbC report should be submitted to the Hong Kong Inland Revenue Department within 12 months after the end of the fiscal year. The report should provide comprehensive information on the multinational group’s activities, profits, and taxes paid in each jurisdiction where it operates.

The CbC report should include details on the identity and tax residency of the constituent entities of the multinational group, their business activities, and the amount of revenue, profit before income tax, income tax paid and accrued, and the number of employees in each jurisdiction.

Multinational groups with Hong Kong entities that are required to prepare and file a CbC report must appoint a reporting entity to file the report on behalf of the group. The reporting entity should be the ultimate parent entity of the multinational group unless:

• The ultimate parent entity is not required to file a CbC report in its jurisdiction of tax residence, or
• The tax authorities of the jurisdiction of tax residence of the ultimate parent entity have not entered into an agreement for the exchange of CbC reports with the Hong Kong tax authorities.

In these cases, another constituent entity of the multinational group may be designated as the reporting entity.

The multinational group should also appoint a surrogate parent entity to file the CbC report if the ultimate parent entity is not required to file a CbC report in its jurisdiction of tax residence or if the tax authorities of the jurisdiction of tax residence of the ultimate parent entity have not entered into an agreement for the exchange of CbC reports with the Hong Kong tax authorities.

Failure to comply with CbC reporting requirements in Hong Kong may result in penalties. The penalty for non-compliance with the CbC reporting requirements is up to HKD 100,000. Moreover, the Hong Kong Inland Revenue Department may also exchange the CbC report with other tax jurisdictions where the multinational group operates.

In summary, Hong Kong requires multinational groups with annual consolidated group revenue of at least HKD 6.8 billion to file a CbC report that provides comprehensive information on the activities, profits, and taxes paid by the multinational group in each jurisdiction where it operates. Failure to comply with CbC reporting requirements may result in penalties, and multinational groups should appoint a reporting entity and a surrogate parent entity to file the CbC report.