On December 27, 2024, the Hong Kong Government gazetted the “Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Bill 2024.” This bill intends to implement the international tax reform framework, BEPS 2.0, promoted by the Organization for Economic Cooperation and Development (OECD) in October 2021.
15% Global Minimum Tax
According to BEPS 2.0, multinational groups with annual consolidated revenues of €750 million or more shall pay a global minimum tax of at least 15% in each jurisdiction where they operate. This measure aims to reduce the transfer of profits to tax havens and reduce unfair competition among countries attracting investment by lowering tax rates.
Hong Kong Minimum Top-up Tax (HKMTT)
According to the HKMTT implementation as of 2025, Hong Kong will be entitled to levy a top-up tax to reach that rate if the effective tax rate of a multinational group in Hong Kong is below 15%. Otherwise, other jurisdictions could claim this additional tax. This measure should generate an estimated annual revenue of roughly HK$15 billion as of the fiscal year 2027-2028.
Commitment to Transparency and Tax Fairness
The Secretary for Financial Services and the Treasury, Christopher Hui, emphasized Hong Kong’s commitment to international efforts against tax evasion. In addition, he stressed that, in a fairer tax environment, Hong Kong’s advantages, such as its simple and transparent tax regime, mature financial markets, and modern infrastructure, will be further enhanced.
Technical Advice and Support
In order to facilitate the transition, the Inland Revenue Department established a specialized team to provide technical support and publish online guides to address common concerns of multinational groups.
Next Steps
The bill is expected to be introduced for its first reading in the Legislative Council on January 8, 2025.
Frequent Questions
- What is BEPS 2.0? It is an international tax reform framework developed by the OECD to address the risks of tax base erosion and profit shifting, particularly in the digitized economy.
- Who is affected by the HKMTT? Multinational groups with annual consolidated revenues of €750 million or more operating in Hong Kong.
- When will the HKMTT come into force? As of 2025, subject to legislative approval.
For further information regarding the effects of these reforms on your business and to ensure compliance with the new regulations, don’t hesitate to get in touch with TPC Group. Our experienced Transfer Pricing team is available to advise you and assist you in navigating this new tax environment.
Source: Hong Kong Info Gov.
