Hong Kong has implemented Country-by-Country Reporting (CbCR) as part of its commitment to the OECD BEPS Action 13 framework, enhancing tax transparency and preventing base erosion and profit shifting. The Inland Revenue Department (IRD) is the competent authority overseeing CbCR compliance in Hong Kong.

This guide provides CFOs and tax professionals with a structured overview of Hong Kong’s CbCR framework, including applicability, reporting obligations, submission process, penalties, and key resources.

Applicability of CbCR in Hong Kong

Criteria for Reporting

CbCR requirements apply to multinational enterprise (MNE) groups that:

• Have consolidated annual revenue of at least HKD 6.8 billion (approximately EUR 750 million) in the preceding financial year.
• Include at least one entity or permanent establishment (PE) in Hong Kong.

Local Filing Requirements

A Hong Kong entity must file a CbC report if:

• It is the Ultimate Parent Entity (UPE) of the MNE group.
• It has been designated as the Surrogate Parent Entity (SPE) for CbCR purposes.
• The UPE is in a jurisdiction that does not require CbCR or does not have a qualifying exchange agreement with Hong Kong.

Relevant Legislation

• Inland Revenue (Amendment) (No. 6) Ordinance 2018 – Implements Hong Kong’s CbCR framework.
• OECD BEPS Action 13 – Forms the basis for Hong Kong’s CbCR regulations.

Reporting Requirements

Content of the CbC Report

The CbC report must provide jurisdictional financial data, including:

• Total revenues (both related and unrelated party transactions).
• Profit or loss before income tax.
• Income tax paid and accrued.
• Stated capital and retained earnings.
• Number of employees.
• Tangible assets excluding cash or cash equivalents.

Notification Requirement

• All Hong Kong entities within an MNE group must notify the IRD regarding which entity will file the CbC report and in which jurisdiction.
• The notification must be submitted electronically within 3 months after the end of the financial year.

Submission Platform

• Reports must be electronically filed via the IRD’s CbCR Portal, using the OECD CbCR XML schema.

Resource

Filing instructions and guidelines are available on the Inland Revenue Department website:
IRD Hong Kong – CbCR

Filing Deadlines

• CbC Reports: Must be filed within 12 months after the end of the financial year.
  • Example: For a financial year ending 31 December 2023, the report must be submitted by 31 December 2024.
• Notifications: Must be filed within 3 months after the end of the financial year.

Penalties for Non-Compliance

Penalties and Consequences

Failure to comply with Hong Kong’s CbCR requirements may result in:

• Fines of up to HKD 50,000 for failure to submit or inaccurate reporting.
• Additional penalties of up to HKD 100,000 for persistent non-compliance.
• Increased scrutiny from the IRD, leading to potential tax audits.

Mitigation Measures

• Companies can apply for extensions or appeal penalties if they can demonstrate reasonable cause for non-compliance.

Confidentiality and Data Exchange

Data Protection

• The IRD ensures that CbC reports remain confidential and are only used for tax risk assessment purposes.
• Reports are automatically exchanged with jurisdictions that have a bilateral exchange agreement with Hong Kong.