Hong Kong Updates Global Minimum Tax Bill for OECD Administrative Guidance and Other Updates

General

In April 2025, the Hong Kong Government proposed a number of Committee Stage Amendments to the Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Bill 2024.

Many of the amendments relate to impacts on the profit tax regime, as well as some of the more detailed compliance requirements (eg record keeping time limits). 

However, the amendments did include updates for the January 2025 and June 2024 OECD Administrative Guidance, as well as certain other amendments. We highlight the key changes below:

Inclusion of the January 2025 OECD Guidance

Section 26AF of the Bill provides that the application of the GloBE rules in Hong Kong (including Schedule 61 which reproduces the GloBE model rules) is to be construed in accordance with the ‘OECD GloBE rules guidance’ in a way that best serves the purpose of making provision for the following, within the meaning of the OECD GloBE model rules:

-a qualified IIR;

-a qualified UTPR;

-a qualified domestic minimum top-up tax;

-safe harbours.

The OECD GloBE rules guidance is defined in Part 1 of Schedule 64 to the Bill as including the:

-April 2024 Consolidated Commentary to the GloBE Rules

-February 2023 OECD Administrative Guidance (AG1)

-July 2023 OECD Administrative Guidance (AG2)

-December 2023 OECD Administrative Guidance (AG3)

-June 2024 OECD Administrative Guidance (AG4)

-April 2024 Examples to the Model Rules

The April 2025 amendment to the Bill also includes the:

–January 2025 OECD Central Record of Legislation with Transitional Qualified Status

–January 2025 OECD Administrative Guidance on Article 8.1.4 and 8.1.5 of the Model Rules

–January 2025 OECD Administrative Guidance on Article 9.1 of the Model Rules

–January 2025 OECD Guidance on the GloBE Information Return

–March 2025 update to the OECD Central Record of Legislation with Transitional Qualified Status

Each of these is to be taken into account for GloBE purposes in Hong Kong from January 1, 2025.

Therefore, all aspects of the OECD Administrative Guidance to date should be applied in Hong Kong.

QDMTT Safe Harbour Switch-Off Rule

Section 14 of Part 3 of Schedule 61 of the Bill provides that a jurisdiction qualifies for the QDMTT safe harbour if meets the QDMTT safe harbour standards under an OECD peer review process for that fiscal year.

The Bill also outlines a number of cases where the Switch-Off Rule applies (as provided in the OECD Administrative Guidance).

The April 2025 amendment also provides that the QDMTT safe harbour does not apply if:

-a member of the MNE group is a securitization entity participating in a securitization arrangement and is located in the jurisdiction; and

-the QDMTT in the jurisdiction does not impose a charge in any circumstances on a securitization entity.

A new Section 24B in Schedule 61, Division 3 also applies the amendment to the QDMTT Safe Harbour as provided by the January 2025 OECD Administrative Guidance on Article 9.1.2 of the OECD Model Rules (to apply the Switch-Off rule to jurisdictions that allow certain DTA reversals to be taken into account for adjusted covered taxes).

Transitional CbCR Safe Harbour Amendment

The January 2025 OECD Administrative Guidance included an amendment to the Transitional CbCR Safe Harbour to exclude the reversals of certain deferred tax assets from the definition of simplified covered taxes, where they are within the scope of January 2025 OECD Administrative Guidance.

This is provided in Schedule 61, Part 3(7).

Removal of the ‘Main Purpose Test’ Anti-Avoidance Rule

Section 26AH of the Bill applied an anti-avoidance rule if:

-a person enters into any arrangements; and

-the main purpose, or one of the main purposes, of the person in entering into the arrangements is to avoid any obligation under the GloBE provisions.

Where this applied the GloBE provisions applied as if the arrangements had not been entered into.

However, in the April 2025 amendment to the Bill this was removed and the general anti-avoidance rule under section 61A is to be applied (a ‘sole or dominant purpose test’), with proposed modifications, to the global minimum tax and HKMTT regimes. 

QDMTT – Local Accounting Standard

Schedule 61, Section 5 of the Bill provides that the accounting standard used for determining the HKMTT will be a local accounting standard if:

-each HK constituent entity of the MNE group has financial accounts prepared in accordance with the local accounting standard;

-the accounting period of each entity’s accounts is the same as the fiscal year of the consolidated financial statements of the UPE of the MNE group; and

-for the fiscal year:

                  -each HK constituent entity of the MNE group is required to prepare or use the entity’s accounts for determining its liability to tax in Hong Kong or to comply with any other law of Hong Kong; or

                   -each entity’s accounts are subject to external financial audit.

A local accounting standard is defined as International Financial Reporting Standards or the Hong Kong Financial Reporting Standards.

The April 2025 amendment to the Bill changes this to the International Financial Reporting Standards or accounting standards as defined by section 357(1) of the Companies Ordinance (Cap. 622).

QDMTT – Taxes Pushed Down

As required in the OECD Administrative Guidance, Section 6 of Schedule 61 excludes taxes pushed down to PEs, CFCs, Hybrids and taxes on distributions (aside from domestic withholding tax).

The April 2025 amendment to the Bill includes the June 2024 OECD Administrative Guidance on the pushdown restriction for Hybrid/Reverse Hybrid entities. As such covered taxes accrued in the financial accounts of a constituent entity-owner of the HK constituent entity are to be included in the adjusted covered taxes of the HK constituent entity if the taxes:

-are allocated to the HK constituent entity under Article 4.3.2(d) of the GloBE rules;

-are imposed by the jurisdiction of the HK constituent entity; and

-relate to the income of the HK constituent entity.

Top-Up Tax Return Filing

A top-up tax return is required to be submitted by the GIR filing deadline. However, the amended Schedule 63(3) in the April 2025 amendment to the Bill provides that this is not required if the HK constituent entity is neither the UPE, nor the designated filing entity, nor the designated local entity, of the MNE group, and both of the following apply:

-another HK constituent entity of the MNE group has filed the top-up tax return; and

-that other HK constituent entity’s top-up tax return for the fiscal year contains a statement, that the assessment triggering information concerned is provided in the return with the consent of all HK constituent entities, or the UPE, of the MNE group.