{"id":108,"date":"2026-10-26T02:25:00","date_gmt":"2026-10-26T02:25:00","guid":{"rendered":"https:\/\/vivosgroup.com\/hk\/?p=108"},"modified":"2026-10-05T08:13:04","modified_gmt":"2026-10-05T08:13:04","slug":"hong-kong-transfer-pricing-documentation","status":"publish","type":"post","link":"https:\/\/vivosgroup.com\/hk\/insights\/hong-kong-transfer-pricing-documentation\/","title":{"rendered":"Hong Kong Transfer Pricing Documentation in 2026: Master File and Local File Thresholds"},"content":{"rendered":"\n
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Insights \u00b7 Hong Kong Tax<\/p>\n\n\n\n

Hong Kong Transfer Pricing Documentation in 2026: Master File and Local File Thresholds<\/h1>\n\n\n\n

Under Part 9A of the Inland Revenue Ordinance, a Hong Kong entity that transacts with associated enterprises must prepare a master file and local file within 9 months after each accounting period ends, unless exempt. It is exempt if it meets any two of three tests: revenue up to HK$400 million, assets up to HK$300 million and an average of no more than 100 employees. Smaller transaction types are also exempt, and groups with revenue of EUR750 million or more file country-by-country reports.<\/p>\n\n\n\n

For finance leads of Hong Kong companies in multinational groups. This guide covers who must prepare transfer pricing documentation, the size and transaction exemptions, the 9-month deadline, country-by-country reporting and the penalties for getting it wrong.<\/p>\n<\/div>\n\n\n\n

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Point<\/th>Position at 2 October 2026<\/th><\/tr>
Legal basis<\/td>Part 8AA (arm\u2019s length rule, section 50AAF) and Part 9A (documentation and CbC, section 58C onwards), Inland Revenue Ordinance<\/td><\/tr>
Who prepares<\/td>Hong Kong entities transacting with associated enterprises, for accounting periods beginning on or after 1 April 2018<\/td><\/tr>
Size exemption (any 2 of 3)<\/td>Revenue up to HK$400 million; assets up to HK$300 million; average of up to 100 employees<\/td><\/tr>
Transaction exemption<\/td>Per category, below HK$220 million (property), HK$110 million (financial assets), HK$110 million (intangibles) or HK$44 million (other)<\/td><\/tr>
Deadline and retention<\/td>Prepare within 9 months after the period ends; keep at least 7 years; produce on request<\/td><\/tr>
Profits tax return<\/td>Files not lodged; position declared in Supplementary Form S2<\/td><\/tr>
Country-by-country reporting<\/td>Group revenue of HK$6.8 billion (EUR750 million) or more; notify within 3 months, file within 12 months<\/td><\/tr>
Penalties<\/td>HK$50,000 fine for not preparing files; HK$100,000 for ignoring a court order; additional tax up to the tax undercharged<\/td><\/tr><\/tbody><\/table><\/figure>\n<\/div>\n\n\n\n
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Who must prepare a master file and local file<\/h2>\n\n\n\n

Hong Kong\u2019s transfer pricing law has two layers. Part 8AA of the Inland Revenue Ordinance, including section 50AAF, requires arm\u2019s length pricing between associated persons from the 2018\/19 year of assessment. Part 9A sets the documentation duties: section 58C requires a master file and local file for accounting periods beginning on or after 1 April 2018, and later sections cover country-by-country (CbC) reporting. The Inland Revenue Department explains both in DIPN 58 and DIPN 59.<\/p>\n\n\n\n

The duty falls on a Hong Kong entity of a group that transacts with associated enterprises: a corporation, partnership or trust resident in Hong Kong, or a permanent establishment such as a branch. A specified domestic transaction with a Hong Kong associate, where each side\u2019s income is chargeable to Hong Kong tax or each side\u2019s loss is allowable, is ignored when testing the thresholds.<\/p>\n\n\n\n

The first exemption is size. An entity need not prepare either file if it meets any two of three conditions for the accounting period: revenue not exceeding HK$400 million, total assets at the period end not exceeding HK$300 million, and an average of no more than 100 employees. The IRD counts tax-free income in revenue and takes assets net of accounting depreciation, and the figures are not pro-rated for a short first or final year.<\/p>\n<\/div>\n\n\n\n

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Transaction thresholds, the 9-month deadline and what the files contain<\/h2>\n\n\n\n

An entity that fails the size test may still be exempt by transaction type. The local file need not cover a category below its threshold for the period: HK$220 million for transfers of property other than financial assets and intangibles, HK$110 million each for financial assets and intangibles, and HK$44 million for other transactions, such as services. Arm\u2019s length amounts are used, and loans are measured by principal. If no category needs covering, no master file is needed either.<\/p>\n\n\n\n

The master file describes the group: structure, business, intangibles, intercompany financing, and financial and tax positions. The local file covers the Hong Kong entity, its controlled transactions and financial information. DIPN 58 accepts a master file prepared by the group parent, although the assessor can ask for more. Both files must be in English or Chinese and prepared within 9 months after the period ends: by 31 December 2026 for a year ending 31 March 2026.<\/p>\n\n\n\n

The files are not lodged with the profits tax return, which asks only for a declaration in Supplementary Form S2; they are produced within the time set in an assessor\u2019s notice and kept for at least 7 years. Some local file information can be rolled forward for up to 3 years if the facts are unchanged, but the IRD expects transactions to be reviewed every year.<\/p>\n<\/div>\n\n\n\n

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Country-by-country reporting and penalties<\/h2>\n\n\n\n

CbC reporting applies to multinational groups with consolidated revenue of at least HK$6.8 billion (EUR750 million) in the preceding accounting period, for periods beginning on or after 1 January 2018. A Hong Kong ultimate parent files the CbC return through the IRD\u2019s portal within 12 months after the period ends. Each Hong Kong group entity must notify the IRD within 3 months after the period ends, unless another has notified for the group, and may have to file the report itself if the parent\u2019s jurisdiction does not supply it.<\/p>\n\n\n\n

Failing to prepare a required master file or local file without reasonable excuse carries a level 5 fine of HK$50,000, and a court can order the files prepared; ignoring the order risks a level 6 fine of HK$100,000. The IRD\u2019s FAQs say each Hong Kong entity can be fined HK$50,000 for CbC failures, with daily fines if they continue after conviction. The bigger risk is tax: under DIPN 59, non-arm\u2019s length pricing can attract additional tax of up to the tax undercharged, unless reasonable efforts are shown.<\/p>\n\n\n\n

The EUR750 million figure now matters twice: Hong Kong\u2019s global minimum tax rules, enacted on 6 June 2025 for fiscal years beginning on or after 1 January 2025, use the same threshold, tested in two of the four preceding years.<\/p>\n<\/div>\n\n\n\n

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A transfer pricing checklist for each year end<\/h2>\n\n\n\n