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Mutual Agreement Procedure

 


What is Mutual Agreement Procedure

If you are a Hong Kong resident and are exposed to double taxation or taxation not in accordance with the provisions of a Comprehensive Double Taxation Agreement / Arrangement (DTA), you can present your case to the Hong Kong competent authority for assistance.

If your request is accepted and cannot be resolved by the Hong Kong competent authority unilaterally, the Hong Kong competent authority will discuss the case with the competent authority of our treaty partner and try to resolve it in accordance with the relevant DTA.  This process is known as Mutual Agreement Procedure (MAP).

A MAP is part of the dispute resolution process provided under the MAP article in the DTAs and is in addition to your objection and appeal rights. Please refer to Hong Kong’s Dispute Resolution Profile on the OECD’s website for more information.

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Who can Apply

MAP is available to a Hong Kong resident.  Definition of a Hong Kong resident can be found in the Resident article, and the Protocol(s) as appropriate, of the relevant DTA.

The Inland Revenue Department does not impose any fee for MAP.  You may however incur costs of your own, in particular the fees of engaging professional services.

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When to Apply

MAP should be initiated within the time limit from the first notification of the actions giving rise to taxation not in accordance with the provisions of the DTAs.  In general, the time limit is specified in the MAP article of the relevant DTA (e.g. three years).  Failure to observe the time limit may result in the rejection of your MAP request by the Hong Kong competent authority.

For the purpose of applying the time limit, the first notification of actions giving rise to taxation not in accordance with the provisions of the DTAs is usually the relevant notice of assessment or loss computation issued by the Inland Revenue Department or the equivalent notification from our treaty partners.

You should only initiate MAP when double taxation has occurred or is almost certain to occur.  Double taxation should not be just a possibility, such as the mere existence of an audit or an examination of your tax affairs.

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How to Apply

You can make a MAP request by completing the Form IR1454 and returning it to:

The Hong Kong Competent Authority
36/F, Revenue Tower
5 Gloucester Road, Wan Chai, Hong Kong
[Attn: Chief Assessor (Tax Treaty)]

You must provide the following information and documents specified in the Form IR1454:

  1. our treaty partner concerned and details of its tax administration;
  2. your particulars including name, address, telephone number, business registration number / Hong Kong identity card number and your file number in the Inland Revenue Department;
  3. issues for MAP including a summary of the facts, description and analysis of the issues, actions giving rise to the issues with the date of first notification, years or periods concerned and your views and proposed basis for resolving the issues;
  4. whether any notice of objection, notice of appeal, refund claim, or comparable document has been submitted by you to either the Inland Revenue Department or the tax administration of our treaty partner;
  5. whether a prior request has been made to the competent authority of Hong Kong or our treaty partner on the same or related issues;
  6. whether MAP application involves issues that are currently or were previously considered by the Inland Revenue Department or the tax administration of our treaty partner as part of an advance pricing arrangement, ruling, or similar proceedings;
  7. whether any settlement or agreement has been reached with the Inland Revenue Department or the tax administration of our treaty partner which may affect the MAP application;
  8. details of your authorized representative with a copy of the authorization letter;
  9. a copy of the first notification of action giving rise to the issues for MAP;
  10. a copy of other MAP application and the associated documents filed, or to filed, with the competent authority of our treaty partner, if applicable;
  11. a schedule of any time limitations under domestic laws of our treaty partner in respect of the years / periods for which relief is sought, if applicable;
  12. a copy of transfer pricing documentation, if applicable;
  13. a statement agreeing that all documents and information submitted may be provided to the competent authority of our treaty partner for processing the MAP application; and
  14. a statement declaring that all documents and information provided in the MAP application are true, complete and accurate.

If the documents are not in English or Chinese, you are also required to provide the English translations.

It is your responsibility to set out the pertinent facts and circumstances regarding the case in question and to supply all of the elements necessary for the MAP to be completed.

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Two Stages to MAP in Hong Kong

Stage 1 – Presentation of case

After you have presented a case to the Hong Kong competent authority, the Hong Kong competent authority will consider whether the case presented is justified and whether it is able to arrive at a satisfactory solution itself.  If the case cannot be resolved at the first stage, the Hong Kong competent authority has an obligation to endeavour to resolve the case by mutual agreement with the competent authority of our treaty partner.

Stage 2 – Joint resolution

The second stage commences with the Hong Kong competent authority approaching the competent authority of our treaty partner. This stage imposes on the competent authorities a duty to negotiate and to use their best endeavours to resolve the case.

Communications between the competent authorities will usually be through an exchange of position papers.  Information provided by you will be taken into account in the preparation of Hong Kong’s position papers.

Where a case involves significant issues upon which agreement cannot be reached through the exchange of position papers, the competent authorities may meet for negotiations.  You do not have a right to be present at such negotiations.  However, where both competent authorities agree, you may personally present your case to the competent authorities jointly.

The Hong Kong competent authority will endeavour to ensure that communications are undertaken on a timely basis to facilitate resolution of cases as quickly as possible.  You will be kept informed of the progress by the Hong Kong competent authority.

While the Hong Kong competent authority works to achieve timely resolution of the MAP case, the complexity of issues involved in each case will determine the actual time needed to resolve the case. 

When the competent authorities have reached an agreement, you will be asked whether you accept the competent authorities’ agreement as the final resolution or not.  The agreement will only be implemented if you accept the agreement in writing.  If you do not accept the terms and conditions of the agreement, the Hong Kong competent authority will propose to the competent authority of our treaty partner to close the case without an agreement.

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Treaty Partners Contact the Hong Kong Competent Authority

The competent authorities of our treaty partners can contact the Hong Kong competent authority by writing to:

The Hong Kong Competent Authority
36/F, Revenue Tower
5 Gloucester Road, Wan Chai, Hong Kong
[Attn: Chief Assessor (Tax Treaty)]

They can also email the Hong Kong competent authority at taxtt@ird.gov.hk.

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More Information

For more information on MAP relating to transfer pricing, please refer to Departmental Interpretation and Practice Notes No. 45 - Relief from Double Taxation Due to Transfer Pricing or Profit Reallocation Adjustments

For more information on transfer pricing documentation, please refer to paragraph 89 of Departmental Interpretation and Practice Notes No. 46 - Transfer Pricing Guidelines - Methodologies and Related Issues.