BEPS Pillar Two Global Minimum Tax — Hong Kong

Pillar Two applies to MNC groups with annual consolidated revenue of EUR 750M or more in at least 2 of the 4 preceding years. If your HK company is part of such a group, it is in scope. Standalone HK companies below this threshold are not directly subject to GloBE rules — but may be affected by their parent's QDMTT or IIR obligations.

HK enacted its Qualified Domestic Minimum Top-up Tax (QDMTT) effective from financial years beginning 1 January 2025. The QDMTT ensures that top-up tax on HK entities is collected by IRD (not by the parent company's jurisdiction). A qualifying QDMTT allows the HK top-up tax to reduce (safe harbour) the IIR/UTPR in the parent jurisdiction.

GloBE ETR = Adjusted Covered Taxes / GloBE Income (for each jurisdiction). Adjusted Covered Taxes are current taxes from accounts, adjusted for deferred taxes and excluded items. GloBE Income is accounting net income adjusted for permanent differences. The HK ETR calculation starts with profits tax paid but makes numerous adjustments.

The SBIE carves out a portion of GloBE income from the top-up tax calculation, based on genuine local operations. The exclusion is: 5% of eligible employee payroll costs + 5% of eligible tangible asset carrying values in each jurisdiction. Over time (2023-2032), these percentages phase down to 2.5% each. Groups with significant operations in HK benefit most from the SBIE.

The GloBE Information Return must be filed within 15 months of the last day of the reporting fiscal year (18 months for the transitional year). For a December 31, 2025 year-end, the GIR deadline would be June 30, 2027 (transitional) or March 31, 2027 (standard). HK IRD is expected to publish more detailed guidance on local filing mechanics.

No. The top-up tax is an addition to, not a replacement of, the standard HK profits tax. If HK profits tax results in a GloBE ETR below 15%, the top-up tax brings the total to 15%. If the ETR is already ≥15% (common for most active HK trading companies), no top-up tax applies. The most at-risk HK entities are those with significant tax incentives (patent box, offshore claims) that reduce the effective rate below 15%.