Top-up tax looms for multinationals

A domestic minimum top-up tax will be introduced to multinational enterprises in the 2024-2025 financial year to reach the global minimum effective tax rate standard of 15 percent.

Last year, Hong Kong, together with more than 130 jurisdictions across the globe, pledged to implement the international tax reform proposals to address base erosion and profit shifting, Paul Chan said.

The domestic minimum top-up tax will bring in about HK$15 billion more per year based on rough estimates, Chan noted.

As the global minimum effective tax rate under the new reform only targets large multinational enterprise groups with a global turnover of at least 750 million euros (HK$6.65 billion), it will not affect local small and mid-size enterprises, he added.

He believed the minimum top-up tax will also not have a big impact on large multinationals, pointing out that the measure is targeted at such companies headquartered in Hong Kong, which will also have to pay the tax if they move elsewhere.

It is estimated that there are about 200 such large multinationals based here.

As some of these firms are already effectively paying a tax rate of more than 15 percent, not all of them may be required to pay the top-up tax, local media cited government sources as saying.

Meanwhile, the administration is also considering waiving tax to attract shipping companies and family offices.

Chan said the Hong Kong Maritime and Port Board has proposed providing a tax concession of half the usual rate to attract more maritime enterprises to establish a presence here.

The administration plans to introduce the proposed legislative amendments to the Legislative Council in the first half.

It also plans to provide tax concessions for eligible family investment management entities managed by single-family offices.

The administration will consult the sector on the detailed proposal as soon as possible, expecting that the tax concessions will come into effect in the 2022-2023 financial year.