Hong Kong signed GIR MCAA

Legislative Framework and Implementation Timeline

On 14 May 2026, the Inland Revenue Department ("IRD") announced the launch of the first phase of the Pillar Two Portal on 19 January 2026, enabling Part 4AA entities of in-scope MNE groups to file top-up tax notifications electronically. This initiative stems from Hong Kong’s commitment in July 2021 to join over 130 jurisdictions in accepting the OECD’s BEPS 2.0 two-pillar solution, aimed at mitigating base erosion and profit shifting risks. To fulfill international obligations and safeguard taxing rights, the Financial Secretary announced in the 2024-25 Budget the implementation of a global minimum tax and Hong Kong Minimum Top-up Tax ("HKMTT") from 2025 onwards. Consequently, the Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Ordinance 2025 was enacted on 6 June 2025 to give effect to these measures.

GloBE Rules and Tax Mechanics

Under Pillar Two, a global minimum tax of 15% applies to MNE groups with consolidated revenue of EUR 750 million or more in at least two of the four preceding fiscal years. This is enforced through the Income Inclusion Rule ("IIR") and the Undertaxed Profits Rule ("UTPR"). The IIR imposes top-up tax on parent entities regarding low-taxed constituent entities, while the UTPR acts as a backstop. These interlocking rules, collectively known as the Global Anti-Base Erosion (GloBE) rules, ensure a 15% minimum tax on profits derived from every jurisdiction, reducing incentives for profit shifting. Jurisdictions may implement a Qualified Domestic Minimum Top-up Tax ("QDMTT") to collect top-up tax on low-taxed entities within their own borders before other jurisdictions apply the IIR or UTPR.

Statutory Incorporation and Scope

The Amendment Ordinance adds Part 4AA and Schedules 61 to 64 to the Inland Revenue Ordinance ("IRO") to implement the GloBE rules. Part 1 of Schedule 61 incorporates the OECD GloBE Model Rules with necessary adaptations, while Part 2 contains local UTPR provisions. Part 3 of Schedule 61 details safe harbours and HKMTT, with Schedules 62 and 63 covering tax administration. The OECD GloBE rules documents supplement and clarify the interpretation of these provisions to ensure consistency with international outcomes. The GloBE rules apply only to in-scope MNE groups, with the consolidated revenue threshold incorporated using Euros. Groups using other currencies must translate revenue based on the average foreign exchange rate for December of the prior calendar year, using ECB rates or, if unavailable, Hong Kong Monetary Authority rates.

Entity Location and Tax Liability

To determine top-up tax collection, an entity is considered located in Hong Kong if it is a tax resident or created there. A definition of Hong Kong resident entity is introduced for the IRO, aligning with Comprehensive Double Taxation Agreements ("CDTAs"). This definition applies retrospectively from 1 January 2024, ensuring entities are regarded as located in Hong Kong for the fiscal year 2024, minimizing exposure to top-up tax elsewhere. Under the IIR, top-up tax is imposed on Ultimate Parent Entities ("UPEs"), Hong Kong intermediate parent entities, or Hong Kong partially-owned parent entities based on their ownership interests in low-taxed entities outside Hong Kong. Joint ventures and stateless entities in low-tax jurisdictions may also render MNE groups liable to IIR top-up tax in Hong Kong.

HKMTT and Safe Harbours

The UTPR imposes top-up tax via equivalent adjustment on Hong Kong constituent entities based on employee headcount and tangible assets, unless a designated entity is chosen. HKMTT operates consistently with GloBE rules, imposing tax on low-taxed entities in Hong Kong with priority over IIR and UTPR. Investment and insurance investment entities are excluded to preserve tax neutrality. HKMTT is allocated among Hong Kong constituent entities based on GloBE income unless designated otherwise. The design meets QDMTT requirements, allowing top-up tax paid under HKMTT to be credited against GloBE rules. Qualified MNE groups may benefit from the QDMTT Safe Harbour, deeming Hong Kong top-up tax payable as zero to reduce compliance burdens. All top-up tax is deemed profits tax, allowing existing IRO administration mechanisms to apply.

Tax Administration and Compliance

Reporting and administrative requirements are aligned to ease compliance. Each Hong Kong constituent entity must furnish a single top-up tax return no later than 15 months after the fiscal year end (18 months for the first transition year). The return includes standardised GloBE Information Return ("GIR") data. Entities may designate one local entity to file returns for the group. A top-up tax notification must be filed within six months to identify the group and jurisdiction for GIR exchange. Assessments are issued based on return information with no provisional tax; payment is due one month after the return deadline or assessment notice. Penalties for non-compliance under Sections 80O, 82, and 82A mirror profits tax penalties, extending to service providers under Section 80P.

Anti-Avoidance and Qualified Status

Section 61A of the IRO applies as a general anti-avoidance rule ("GAAR") to the GloBE and HKMTT regimes. It targets transactions entered into for the sole or dominant purpose of obtaining a tax benefit regarding top-up tax liability, considering changes in liability and consistency with OECD outcomes. Where satisfied, the Assistant Commissioner may counteract the benefit. Hong Kong obtained transitional qualified status for its IIR, HKMTT, and QDMTT Safe Harbour from 1 January 2025, recorded in the OECD’s central record. On 21 April 2026, Hong Kong signed the Multilateral Competent Authority Agreement on the Exchange of Global Anti-Base Erosion Information ("GIR MCAA"), enabling group GloBE filing to minimise compliance burdens.

Digitalisation and Filing Requirements

Part 4AA entities must file notifications and returns electronically via the Pillar Two Portal, an extension of the Business Tax Portal ("BTP"). Phase 1 launched for notifications in January 2026, with Phase 2 for returns and assessments in Q4 2026. Notifying entities must register BTP accounts and use e-cert (Organisational) with AEOI Functions for authentication. Service agents may access online services on behalf of entities. A unique group code is required for identification, obtained via Form IR1485. Additionally, mandatory e-filing of profits tax returns applies to Part 4AA entities for years of assessment beginning on or after 1 April 2025. This follows a "once-in, always-in" mechanism, with exceptions for winding-up, amalgamation, or specific filing dates.

Reference Materials and Contact Information

The Amendment Ordinance and relevant OECD materials, including the GloBE Model Rules, Commentaries, Administrative Guidance, and Illustrative Examples, are available for reference. The Inclusive Framework on BEPS will continue to release guidance to ensure consistent interpretation. For queries regarding the global minimum tax or HKMTT, contact This email address is being protected from spambots. You need JavaScript enabled to view it.. Further details on e-filing and portal registration are available on the IRD website and the Pillar Two Resource Centre.