Hong Kong’s Legislative Council has published a letter from the Secretary for Financial Services and the Treasury in response to comments from eight submissions on the Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Bill 2024.

The bill introduces a 15% global minimum tax under Pillar 2, effective from 2025.

The letter states that most comments and suggestions from the submissions have been considered, and the following committee stage amendments will be proposed:

• Apply the sole or dominant purpose test under section 61 A of the Inland Revenue Ordinance (“IRO”) with modifications as the general anti-avoidance rule instead of the main purpose test;
• Provide for a fixed time limit for raising top-up tax assessment (8 years for non-evasion cases, and 12 years for evasion cases);
• Extend the time limit for taxpayers’ application to correct errors or omissions in top-up tax returns and that for claiming a refund of tax paid in excess of the amount of top-up tax chargeable from 6 years to 8 years;
• Shorten the record-keeping period from 12 years to 9 years after the completion of the transactions, acts or operations to which the records relate;
• Reduce compliance burden by extending the time limit for filing Global Anti-base Erosion (“GloBE”) information returns from 30 days to at least 60 days if the exchange mechanisms fail, and relieving a HK constituent entity from the relevant filing requirement under certain conditions;
• Remove the proposed section 80Q on offences by directors, etc., and provide for a time limit (8 years) for initiating proceedings under the proposed sections 800 and SOP on offences by Part 4AA entities and service providers, respectively;
• Include the requirement that no prosecution in respect of an offence under the proposed section 800 may be initiated except with the sanction of the Commissioner of Inland Revenue;
• Extend the proposed section 25A on reimbursement for top-up tax to cover top-up tax under the Income Inclusion Rule (“IIR”) and relax the reimbursement limit subject to certain conditions;
• Provide the necessary clarity on application of the GloBE rules, commentaries and administrative guidance promulgated by the Organisation for Economic Co-operation and Development (“OECD”), such as safe harbours and calculation of the Hong Kong minimum top up tax (“HKMTT”), and the possibility of using the qualified domestic minimum top-up tax (“QDMTT”) payable in other jurisdictions as a tax credit in Hong Kong; and
• Incorporate the requirement of mandatory e-filing for profit tax returns into the Bill.

Earlier, Hong Kong’s government published the Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Bill 2024 in the Gazette on 27 December 2024. This legislation aligns with the international tax reform framework, BEPS 2.0, introduced by the OECD in October 2021. It will implement the global minimum tax and Hong Kong’s minimum top-up tax (HKMTT), set to begin in 2025.