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Minimise Financial Treat Through the Best Transfer Pricing Services in Hong Kong
Setting up and running a business is certainly a challenging feat. As a business owner, you will need to know the many types of terms, conditions, laws and regulatory compliances to adhere to and keep up with. Lately, the number of transactions within companies has turned transfer pricing to a financial trap risk for local and regional businesses. This can be especially daunting if you do not fully understand the concept of transfer prices and the potential threat it carries. Therefore, for this very reason, companies choose to utilize transfer pricing services in Hong Kong. But first, let’s dive into what is meant by transfer pricing.
The Practice of Transfer Pricing
Transfer pricing (TP) refers to the conditions and settings of goods and services sold among divisions within an enterprise. It is an accounting practice that represents the price of consumption between legal entities under multi-national ownership. For example, let’s say a subsidiary company provides supplies (goods) or labour (services) to the parent company. The goods or labour will leave from one division and enter another; the transactions hold monetary value and therefore, is known as the transfer price. The importance of correctly understand transfer price is crucial as it allows you to save money and mitigate financial risks if done the right way.
Why Is It Important to Know About Transfer Pricing?
Transfer pricing has various advantages, such as lowering the costs of products. Transfer price is usually lower than the market price of the product, which allows companies to source their goods and services in an optimum value. Additionally, the transfer pricing method has clarity. The technique makes inter-department transactions between departments transparent and unexploitable. In the case of absent transfer price, departments will be able to charge price arbitrarily and abuse the pricing rates. Hence why the clarity of setting transfer price in crucial to avoid hindering the growth and sustenance of a company.
At the same time, the process of transfer prices is tedious and complicated. Transfer price is not set by the marketplace; many other factors come into play which makes the setting of transfer price a difficult task. Furthermore, there are rampant transfer mispricing as well. Some companies attempt to manipulate taxes on other countries with a fluctuation situation. Abusing taxes is a serious offence, and if found guilty, one could face huge drawbacks such as tax liabilities, penalties and end up with a damaged business reputation.
To combat the increasing number of tax abuse and avoidance, countries across the globe have enacted stricter rules on transfer pricing. With that being said, the necessity to transfer pricing is more critical than ever.
Transfer Pricing in Hong Kong
In Hong Kong’s land of an entrepreneurial hub, businesses sprout quickly, and the marketplace exponentiates. In line with that, the Hong Kong government has released new and updated policies to help business owners run their organization smoothly and the safeguard the nation’s economy.
On the 13th of July 2018, the Hong Kong government updated its new transfer pricing law through the Inland Revenue (Amendment) (No. 6) Ordinance 2018 (“Amendment Ordinance”). The new regime sets the transfer pricing rules in Hong Kong and is mostly consistent with the Organization for Economic Cooperation and Development (OECD) transfer pricing guidelines. The new transfer pricing rules in Hong Kong encompasses Arm’s Length Principle, Master File and Local File, Country-by-Country Report, Permanent Establishment, Intellectual Property and Advanced Pricing Arrangements.
How Do I Begin My Transfer Price Services in Hong Kong?
3E Accounting Hong Kong has the most comprehensive services that will help you and your organization to thrive without worries. We understand that you may have concerns about the rigmarole of the transfer pricing process and its potential financial risks. 3E Accounting Hong Kong associate is the leading accounting firm that has been the primary choice for companies across the globe to resolve their transfer pricing. Our multi-disciplinary team of experts in the field of law, economics, finance, tax, and accounting are dedicated to bringing you the best results. If you would like to inquire more, consult us and learn about 3E Accounting Hong Kong’s transfer pricing services!
