Global Daily Tax News, HK Lawmakers Approve Pillar Two Legislation, (May 30, 2025)

Hong Kong's Legislative Council has approved legislation for the implementation of the OECD's Pillar Two minimum top-up tax framework on large multinationals.

The Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Bill 2024 ...

Hong Kong's Legislative Council has approved legislation for the implementation of the OECD's Pillar Two minimum top-up tax framework on large multinationals.

The Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Bill 2024 provides for the implementation of the territory's global minimum tax and Hong Kong minimum top-up tax from January 1, 2025.

Under the Pillar Two framework, large multinational enterprise (MNE) groups with an annual consolidated revenue of EUR750m or more must pay a global minimum tax of at least 15 percent in every jurisdiction in which they operate.

With the implementation of the HKMTT, if the effective tax rate of an in-scope MNE group in Hong Kong is lower than 15 percent, Hong Kong has the right to collect top-up tax from the group's entities in Hong Kong to bring their effective tax rate up to 15 percent.

The Inland Revenue Department has confirmed the following measures to simplify compliance:

taxpayers may rely on safe harbors developed by the OECD under the framework;
the record-keeping period has been shortened, and where international exchange mechanisms fail the proposed time limit for filing a Global Anti-Base Erosion information return will be extended;
the "sole or dominant purpose test", instead of the "main purpose test" originally proposed, has been adopted as the general anti-avoidance provision, to maintain consistency with existing law;
the qualified domestic minimum top-up tax payable in other jurisdictions will be allowed as a tax credit against profits tax charged under Part 4 of the Inland Revenue Ordinance (Cap. 112) where appropriate; and
the top-up tax to be collected in Hong Kong will be deemed as profits tax so that the relevant existing tax administration mechanisms in the Inland Revenue Ordinance can be applied.

The Government previously said it may implement the Undertaxed Payments Rule (UTPR) in future, subject to further studies, having regard to the implementation timelines of other jurisdictions.

Global Daily Tax News, HK Lawmakers Approve Pillar Two Legislation, (May 30, 2025)

Hong Kong's Legislative Council has approved legislation for the implementation of the OECD's Pillar Two minimum top-up tax framework on large multinationals.

The Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Bill 2024 ...

Hong Kong's Legislative Council has approved legislation for the implementation of the OECD's Pillar Two minimum top-up tax framework on large multinationals.

The Inland Revenue Department has confirmed the following measures to simplify compliance:

taxpayers may rely on safe harbors developed by the OECD under the framework;
the record-keeping period has been shortened, and where international exchange mechanisms fail the proposed time limit for filing a Global Anti-Base Erosion information return will be extended;
the "sole or dominant purpose test", instead of the "main purpose test" originally proposed, has been adopted as the general anti-avoidance provision, to maintain consistency with existing law;
the qualified domestic minimum top-up tax payable in other jurisdictions will be allowed as a tax credit against profits tax charged under Part 4 of the Inland Revenue Ordinance (Cap. 112) where appropriate; and
the top-up tax to be collected in Hong Kong will be deemed as profits tax so that the relevant existing tax administration mechanisms in the Inland Revenue Ordinance can be applied.

The Government previously said it may implement the Undertaxed Payments Rule (UTPR) in future, subject to further studies, having regard to the implementation timelines of other jurisdictions.