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The Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Bill 2024
Hong Kong joined Pillar Two of BEPS announced by the Organisation for Economic Co-operation and Development (OECD) in July 2021. In response to Pillar Two, the Hong Kong government gazetted the Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Bill 2024 on 27 December 2024 to tackle BEPS risks. The Bill is subject to scrutiny by the Legislative Council and is not enacted.
Basically, the MNE group is subject to a global minimum tax rate of 15% for the profits derived if the MNE group has annual consolidated revenue over EUR 750 million in at least two of four fiscal years. For some jurisdictions with an effective tax rate lower than 15%, the OECD allows its own jurisdictions to introduce their qualified domestic minimum top-up tax first. Otherwise, it will be imposed by another jurisdiction. The Bill aligns with OECD’s guidelines. Introducing a Hong Kong minimum tax rate of 15% for in-scope MNE groups can avoid giving up the right of tax chargeability to other jurisdictions.
Tax compliance
Each Hong Kong constituent entity is required to file a single top-up tax return and a notification to the Hong Kong Inland Revenue Department within 15 months and 6 months after the fiscal year ended date, respectively. To simplify the filing, the in-scope MNE group can designate one Hong Kong constituent entity to file the top-up tax return and notification in order to relieve the filing obligation of other Hong Kong constituent entities.
Assessment for top-up tax
A notice of assessment will be issued based on the information in the top-up tax return, no provisional tax is charged. Each Hong Kong constituent entity is only liable to its portion of the top-up tax. Same as tax filing and notification arrangement, the in-scope MNE group can designate which Hong Kong constituent entities have to pay the top-up tax. However, if the notice of assessment is not settled in a timely manner, all Hong Kong constituent entities are liable for the top-up tax payable of the group.
Waiver of Stamp Duty on Real Estate Investment Trust’s (REIT) transactions
Prior to 21 December 2024, trading of REIT shares or units is subject to stamp duty at a rate of 0.2% in total. The Hong Kong government believes that the waiver of stamp duty will attract more investors for trading on REIT shares and units in Hong Kong, building up the competitiveness of Hong Kong’s REIT market.
Waiver of Stamp Duty for jobbing business of options market makers
Except for options market makers, other market makers are not required to pay stamp duty for contract notes when making market dealing in other products. This waiver of stamp duty is to reduce the trading cost, in alignment with other market makers and to enhance the efficiency of the options market.
Reference/Citation
Legislative Council Brief - Stamp Duty Legislation (Miscellaneous Amendments) Bill 2024
