Hong Kong adopts hybrid legislative for tax regulation revisions

This will take effect for fiscal years beginning on or after 1 January 2025.

Hong Kong will adopt a hybrid legislative approach for the implementation of global minimum tax and Hong Kong minimum top-up tax (HKMTT). 

Under this approach, they will be directly incorporating the GloBE rules into the Inland Revenue Ordinance (Chapter 112 of IRO).

Multinational Enterprise (MNE) groups with consolidated annual revenue of, or above, EUR750m (HK$6.5b) in at least two of the previous four fiscal years will fall within the scope of the GloBE rules and the HKMTT. 

The approach would enable MNE groups to resolve any cross-border disputes in relation to their top-up tax liabilities in Hong Kong under Comprehensive avoidance of double taxation agreement or arrangement (CDTAs), according to an analysis by BDO Global

However, smaller MNE groups and purely domestic groups are excluded in the scope. 

Each Hong Kong constituent entity (CE) of an in-scope MNE group will be required to report for the fiscal year starting on or after 1 January 2025. 

They must electronically file an annual top-up tax notification relating to its obligation to file a top-up tax return, and the notification will have to be filed within six months after the end of the fiscal year.

They must also electronically furnish a single top-up tax return for purposes of the GloBE rules and HKMTT (top-up tax return) no later than 15 months after the last day of the reporting fiscal year, extended to 18 months within the transition year.

Failure to file the top-up tax return or top-up notification as required will be considered a “Level 5 offence.” 

In the case of a continuing offence after conviction, a further fine of HK$500 will be imposed for each day of offence. 

Failure to comply with a court order to amend such an offence will be liable on conviction to a fine at “Level 6.”

The Hong Kong SAR (HKSAR) government held a public consultation on the implementation of a global minimum tax and HKMTT in 21 December 2023 and 20 March 2024 to safeguard its taxing rights and alleviate compliance burdens on in-scope MNE groups.