The Hong Kong Special Administrative Region Government today welcomed the Legislative Council’s passage of a bill which seeks to tackle tax evasion risks arising from the digitalisation of the economy.
The Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Bill 2024, formulated in accordance with the Base Erosion & Profit Shifting 2.0 (BEPS 2.0) package promulgated by the Organisation for Economic Co-operation & Development, introduces the global minimum tax (GMT) and the Hong Kong minimum top-up tax (HKMTT) starting January 1, 2025.
It is estimated that the new regimes will bring in an additional revenue of about $15 billion per year from 2027-28 to the Hong Kong SAR Government.
Secretary for Financial Services & the Treasury Christopher Hui said the implementation of the GMT and the HKMTT highlights Hong Kong’s staunch support to international co-operation in tackling cross-border tax evasion, and safeguards Hong Kong’s taxing rights.
“With the 15% GMT for in-scope multinational enterprise (MNE) groups in place, countries and regions can no longer compete for capital and investment by simply lowering their corporate income tax rates.
“With a fairer global taxation environment, our unique advantages such as ‘one country, two systems’, excellent connectivity, first-class infrastructure, mature financial markets, quality talent pools, East-meets-West vibes etc will become even more accentuated to showcase Hong Kong as a premier destination for doing business.”
Under BEPS 2.0, MNE groups with an annual consolidated revenue of 750 million euros or above in at least two of the four fiscal years immediately preceding the current fiscal year will need to pay a GMT of at least 15% on profits derived from every jurisdiction in which they operate.
By imposing the HKMTT, the Hong Kong SAR Government will have the first priority in collecting top-up tax from entities of an MNE group with an effective tax rate (ETR) in Hong Kong below 15%, in order to raise the ETR to 15%. Otherwise, the top-up tax may be collected by other BEPS 2.0-implementing jurisdictions in which the group also operates. Moreover, Hong Kong’s taxing rights would then be ceded to other jurisdictions.
The Hong Kong SAR Government added that the GMT and HKMTT regimes have incorporated a number of features to facilitate compliance by in-scope MNE groups.
The Inland Revenue Department has set up a dedicated team to provide technical support and answer enquiries about BEPS 2.0. The department will also publish online guidance addressing common concerns.
