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Hong Kong Requires Disclosure of Transfer Pricing Information in the New Version of Profits Tax Return

The new version of Profits Tax Return (PTR) issued by the Inland Revenue Department of Hong Kong has become effective from 1 April 2019. A set of supplementary forms has been introduced as part of the PTR. In one of the supplementary forms – Supplementary Form S2 – Transfer pricing, taxpayers are required to disclose certain related-party information and confirm their compliance with transfer pricing requirements.

Taxpayers that meet any of the below three conditions shall be obliged to complete Form S2:

  1. The company had transactions with non-resident associated persons;
  2. The taxpayer has entered into an advance pricing arrangement that covers the company’s transactions; or
  3. The company belongs to a multinational enterprise group that is required to file a country-by-country report in Hong Kong or elsewhere.

Master file and local file

A Hong Kong entity of a group is required to prepare a master file and local file under Part 9A of the Inland Revenue Ordinance in respect of an accounting period beginning on or after 1 April 2018, except where –

A Hong Kong entity which satisfies any two of the conditions below will not be required to prepare a master file and a local file –

  1. total amount of the entity’s revenue does not exceed HK$400 million;
  2. total value of the entity’s assets does not exceed HK$300 million; and
  3. the average number of the entity’s employees does not exceed 100.

Exemption based on the amount of controlled transactions

If the amount of a type of controlled transactions for the relevant accounting period does not exceed the prescribed threshold, a Hong Kong entity will not be required to prepare a local file for that particular category of transactions, as summarized in table 1.

If the Hong Kong entity is fully exempt from preparing a local file, it is not needed to prepare a master file either

The local file of a Hong Kong entity in respect of an accounting period is not required to cover specified domestic transactions and grandfathered transactions.


For any enquiry in relation to the above, please contact May Tung at +852 3643 0726 or by email at

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