The Inland Revenue Department ("IRD") of Hong Kong has introduced a Country-by-Country Reporting ("CbCR") framework, effective for financial years starting on January 1, 2018 ("first filing period").
Multinational Enterprises ("MNEs") with an entity in Hong Kong that meet the prescribed financial thresholds are required to submit a notification to the IRD disclosing details on the filing of the group CbCR. The notifications are required to be filed with the IRD within three months of the financial year end. For the first filing period, the due date for notifications was extended from March 31, 2019 to May 15, 2019. This has been welcomed by taxpayers that need the additional time to identify and organize their global and Hong Kong CbCR obligations.

Consistent with the OECD framework, the IRD will also be participating in automatic exchange mechanisms designed to facilitate the exchange of CbCRs between countries. The Multilateral Competent Authority Agreement on the Exchange of Country by Country Reports ("MCAA") has been designated as the primary platform for Hong Kong to exchange CbCRs with other countries. As the MCAA entered into force in Hong Kong on September 1, 2018, these exchange relationships will not be active during the first filing period and will only be available for periods starting on or after January 1, 2019, limiting Hong Kong's ability to exchange CbCRs during the first filing period. Instead, the Hong Kong IRD will only be able to exchange CbCRs with the following existing bilateral treaty partners: France, Guernsey, Ireland, Japan, Jersey, Republic of Korea, Malta, Netherlands, New Zealand, South Africa and the United Kingdom.

Importantly, Hong Kong taxpayers that are part of an MNE with a CbCR obligation that have not made a primary or surrogate lodgment in one of the 11 countries above, will be required to submit the CbCR in Hong Kong for the first filing period by December 31, 2019.

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