Subsequent to Hong Kong’s commitment to the Organisation for Economic Co-operation and Development ("OECD")'s Base Erosion and Profit Shifting ("BEPS") 2.0 framework, the Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Ordinance 2025 was enacted on 6 June 2025. Starting from 1 January 2025, in-scope multinational enterprise ("MNE") groups—defined as those with annual consolidated revenues of EUR 750 million or more in at least two of the four preceding fiscal years—are subject to a global minimum effective tax rate of 15%. This regime introduces the Hong Kong Minimum Top-Up Tax ("HKMTT") and the Income Inclusion Rule ("IIR"), which will capture tax shortfalls locally and significantly impact entities that currently rely on offshore tax exemptions or preferential tax regimes.

Highlight of the newsletter:

• Implementation timeline: The HKMTT and IIR apply to fiscal years beginning on or after 1 January 2025, while the Undertaxed Profits Rule ("UTPR") will take effect at a later date.
• Impact on offshore claims: If a Hong Kong entity's effective tax rate falls below 15% (e.g., due to successful offshore claims on trading or service profits), the HKMTT ensures Hong Kong retains the primary right to collect a top-up tax to bridge the gap.
• Strict filing deadlines: MNE groups must electronically file a Top-up Tax Notification within 6 months and a Top-up Tax Return within 15 months (extended to 18 months for the first transitional year) after the end of the reporting fiscal year.
• Safe harbours: The Transitional Country-by-Country Reporting ("CbCR") and QDMTT Safe Harbours can alleviate complex GloBE calculations, though mandatory reporting obligations strictly remain.

For further enquiries, please feel free to contact your usual PKF tax executives, or reach out to our Senior Tax Manager Jonathan Lau (jonathanlau@pkf-hk.com) or Tax Partner Henry Fung (henryfung@pkf-hk.com).