World-wide minimal 15% company tax may undermine Hong Kong’s tax incentives to appeal to firms, lawmaker Robert Lee warns

The least price of 15 for each cent will only be 1.5 percentage details under Hong Kong’s corporate tax rate of 16.5 for every cent.

Beneath the new regime, if the successful tax level of a multinational company in Hong Kong is decrease than 15 for every cent, other appropriate jurisdictions will have the right to accumulate leading-up tax.

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“This efficiently places a flooring on level of competition in excess of corporate profits tax, which would imply Hong Kong can no for a longer period offer tax incentives to draw in corporations,” reported lawmaker Robert Lee Wai-wang, who is also the CEO of brokerage Grand Money Holdings.

He conceded, having said that, that the international mother nature of the agreed tax intended Hong Kong would not be at a disadvantage.

“Hong Kong is not shedding out to other markets as this is a world-wide least tax complied by more than 130 jurisdictions which handles all big economies previously,” he explained. “It is a amount enjoying field.”

The world-wide minimal tax, recognized officially as BEPS 2., was promulgated by the Organisation for Economic Co-operation and Advancement (OECD) in Oct 2021 with the objective of guaranteeing that big multinational corporations with once-a-year revenue of at least €750 million (US$820.38 million) pay at the very least 15 for each cent tax on cash flow derived by all their operations about the entire world.

A KPMG report in 2021 mentioned “many enterprises in Hong Kong that have offshore revenue or are making statements beneath incentive regimes may well discover that their productive tax level is down below the international bare minimum.”

“Hong Kong is very likely to undertake the provisions of BEPS 2. and may possibly also get techniques to update its tax foundation to assure that its tax system for multinational enterprises remains match for objective in light-weight of the international tax modifications,” the accountancy giant’s report stated.

“Multinationals will need to appraise whether existing team constructions and intragroup transactional preparations are still acceptable or need to have to be restructured.”

In 2021, Hong Kong joined far more than 130 jurisdictions in committing to the implementation of the minimal tax rule. Monetary Secretary Paul Chan Mo-po in his budget speech this calendar year has indicated Hong Kong will introduce the rule from 2025 onwards.

Assuming the session training receives the aid it demands, the govt will submit a legislation alter proposal to the Legislative Council in the second 50 percent of upcoming 12 months to adjust the Inland Income Ordinance (Cap. 112) to apply the new rule.

“In formulating the legislative proposal, the federal government will try to sustain Hong Kong’s tax competitiveness by upholding Hong Kong’s straightforward, specific and small tax regime,” stated Secretary for Money Solutions and the Treasury Christopher Hui Ching-yu in a statement.

“As an international economic centre and a dependable member of the intercontinental group, Hong Kong has all along been supportive of international attempts to greatly enhance tax transparency and combat tax evasion.”

The government has proposed permitting multinational companies to make your mind up how the new tax rule will be allotted between its Hong Kong entities to offer for overall flexibility. It will also provide protected harbours in the framework to “relieve compliance burden and enrich tax certainty”.

The governing administration will also permit the multinationals to post a single best-up tax return for the reason of the two the global minimal tax and local tax rules to minimise the compliance stress.