Views sought on global minimum tax

Staff reporter

The government has launched a consultation exercise with a view to implementing a global minimum tax rate in Hong Kong, and plans to submit legislative proposals to the legislature in the second half of next year on the basis of the feedback collected during the consultation period.

A global minimum tax is part of an international tax reform under pillar two of the Organization for Economic Co-operation and Development that aims at addressing base erosion and profit shifting risks arising from the digitalization of the economy, or BEPS 2.0.

The consultation seeks views on the implementation of such a minimum tax.

The BEPS 2.0 package requires large multinational enterprise groups to pay a global minimum tax of at least 15 percent on incomes in all jurisdictions where they operate, and limits the scope for local jurisdictions to introduce tax exemptions or extremely low preferential rates.

In 2021, Hong Kong joined over 130 jurisdictions in committing to implementing BEPS 2.0.

Financial Secretary Paul Chan Mo-po indicated in the 2023-24 budget that Hong Kong would enforce the global minimum effective tax rate of 15 percent on eligible MNE groups from 2025 onward.

The tax will affect large MNE groups meeting certain criteria, ensuring that the majority of corporate taxpayers, including local small and medium enterprises, remain unaffected.

"To fulfill our obligation as a co-operative player in international tax co-operation and safeguard Hong Kong's taxing rights, Hong Kong is fully committed to implementing Pillar Two of BEPS 2.0 in accordance with international consensus," said Secretary for Financial Services and the Treasury Christopher Hui Ching-yu.