Government launches public consultation on implementation of global minimum tax and domestic minimum tax in Hong Kong

The government has recently issued a consultation paper (the Paper) on the implementation of the global minimum tax and a domestic minimum top-up tax in Hong Kong (HKMTT) starting from 2025 onwards. The consultation will end on 20 March 2024. 

The global minimum tax under the international reform framework of a two-pillar solution to tackle base erosion and profit shifting (BEPS) risks arising from digitalization of the economy (commonly known as BEPS 2.0) targets multinational enterprise (MNE) groups with annual consolidated revenue of EUR 750 million or above. It ensures that these MNEs pay a minimum tax of 15% in respect of profits derived from every jurisdiction they operate in through two interlocking rules, the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR), which together referred to as the global anti-base erosion (GloBE) rules. To preserve its own taxing right, a jurisdiction may also impose a domestic minimum top-up tax (DMTT). This seeks to put a floor on competition over corporate income tax among jurisdictions. 

The GloBE rules have already been finalized based on the international consensus and there is no room for deviation. As such, the Paper explains the policy considerations and the design features of the GloBE rules which are relevant to Hong Kong and invites views on matters that are left for consideration by the implementing jurisdictions (i.e., administrative framework of the GloBE rules as well as the design and administration of the HKMTT). 

Clients who have any comments on the implementation of the global minimum tax and the HKMTT in Hong Kong as outlined above or any views on the consultation questions can contact their executive.