Introduction

As a member of the international tax reform framework of a two-pillar solution announced by the Organisation for Economic Co-operation and Development (OECD) to tackle base erosion and profit shifting risks arising from the digitalisation of the economy (commonly known as BEPS 2.0)， the Hong Kong government gazetted a draft bill - Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Bill 2024- on 27 December 2024.

Please note that the bill is still subject to Legislative Council scrutiny but will be effective retrospectively from 1 January 2025 upon enactment.

The purpose of this newsletter is to highlight 3 areas within the draft bill’'s framework for our clients’ reference:-

I.Proposed targeted enterprises

II.Proposed implementation flow

III.Proposed timelines for tax administration

Draft bill’'s framework

I.Proposed targeted enterprises

Any Hong Kong resident entity (see Note below) under a multinational enterprise group with annual consolidated revenue of EUR750 million or above in at least 2 of the 4 fiscal years immediately preceding the current fiscal year will be within scope of the legislation (「collectively referred to as 「in-scope MNE groups」).

Note:

Any Hong Kong resident entity means an entity–

i.incorporated in Hong Kong; or

ii.incorporated outside Hong Kong but normally managed / controlled in Hong Kong

Entities engaged in investment fund or predominantly in real estate are excluded.