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Legislative bills

Hong Kong Welcomes Legislative Council's Passage of Tax Evasion Bill

Strategic Insights

— 1 min read

The Hong Kong Special Administrative Region Government has welcomed the Legislative Council's passage of a bill aimed at tackling tax evasion risks arising from the digitalisation of the economy. The bill, which introduces the global minimum tax (GMT) and the Hong Kong minimum top-up tax (HKMTT), is formulated in accordance with the Base Erosion & Profit Shifting 2.0 (BEPS 2.0) package promulgated by the Organisation for Economic Co-operation & Development. The Secretary for Financial Services & the Treasury, Christopher Hui, emphasized that the implementation of the GMT and HKMTT highlights Hong Kong's commitment to international cooperation in tackling cross-border tax evasion and safeguards Hong Kong's taxing rights.

Key Takeaways:

  • The Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Bill 2024 introduces the GMT and HKMTT, set to take effect on January 1, 2025.
  • The GMT aims to prevent countries from competing for capital and investment by lowering corporate income tax rates, promoting a fairer global taxation environment.
  • MNE groups with an annual consolidated revenue of 750 million euros or above will be required to pay a minimum of 15% GMT on profits derived from every jurisdiction.
  • The HKMTT ensures Hong Kong's taxing rights by allowing the government to collect top-up tax from entities with an effective tax rate (ETR) below 15%.
  • The Inland Revenue Department has established a dedicated team to provide technical support and answer enquiries about BEPS 2.0.
  • The department will also publish online guidance addressing common concerns related to the GMT and HKMTT.

Statistics:

  • The new regimes are estimated to bring in an additional revenue of about $15 billion per year from 2027-28 to the Hong Kong SAR Government.
  • The JPM Group, an independent research firm, estimates that the GMT will shift around $10 billion in corporate tax revenue from low-tax jurisdictions to high-tax jurisdictions.
  • Hong Kong's taxing rights will be safeguarded as it will have the first priority in collecting top-up tax from entities of an MNE group with an ETR below 15%.

Sources:

  • The Hong Kong Special Administrative Region Government
  • Organisation for Economic Co-operation & Development (OECD)
  • Base Erosion & Profit Shifting (BEPS) 2.0 Package
  • Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Bill 2024

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