Hong Kong publishes consultation on implementation of Global Minimum Tax

The Hong Kong Legislative Council Panel on Financial Affairs published, on 30 October, the Outcome of the Consultation on the Implementation of Global Minimum Tax and Hong Kong Minimum Top-up Tax (HKMTT), collectively the Pillar Two Global Anti-Base Erosion (GloBE) Rules.

It said it had largely taken on board the views or respondents on the implementation timeline of the Undertaxed Profits Rule (UTPR) and the design of the HKMTT, as well as issues in relation to tax compliance and administration.

The Panel said it intended to:

• Implement the Income Inclusion Rule (IIR) and HKMTT from 2025, while the UTPR will be implemented later subject to further studies, having regard to the implementation timelines of other jurisdictions.
• Introduce a definition for ‘Hong Kong resident entity’ for the general purposes of the Inland Revenue Ordinance (IRO) to determine whether an entity is located in Hong Kong for the purpose of collecting top-up tax.
• Exclude investment entities and insurance investment entities from the scope of HKMTT to preserve tax neutrality for these entities.
• Allow annual designation of one or more than one paying entity for top-up tax under the UTPR and HKMTT regimes to provide flexibility to in-scope MNE groups.
• Extend the payment due date of the top-up tax and the objection period of the top-up tax assessment to ease compliance burden.
• Provide for a longer limitation period for raising assessments under the GloBE rules.

The Panel is finalising the amendments to the IRO and plans to introduce an amendment bill for implementing the global minimum tax and the HKMTT into the Legislative Council by January 2025.