Hong Kong's New Tax Reform: What You Need to Know About the HKMTT (Domestic Minimum Top-Up Tax)
In 2025, Hong Kong will introduce the Domestic Minimum Top-Up Tax (HKMTT) to align with global tax reforms and the Global Minimum Tax initiative. MNEs with revenues over EUR 750 million will need to pay at least a 15% tax on profits derived from Hong Kong. This move ensures Hong Kong remains competitive while securing its tax base.
In this video, we break down the new tax framework, its impact on businesses, and what steps you should take to comply. We also look at how Hong Kong's hybrid approach to implementing these rules will help maintain its standing as a global financial hub.
Don’t miss our next video where we’ll dive deeper into the practical implications of the HKMTT!
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Introduction to HKMTT
Script:
Hong Kong, known for its simple and low-tax regime, is now aligning with global tax reforms. As part of the Global Minimum Tax initiative, Hong Kong is set to introduce its own Domestic Minimum Top-Up Tax, or HKMTT, in 2025.
The HKMTT is designed to ensure that MNEs with revenues exceeding EUR 750 million pay at least a 15% tax on profits derived from Hong Kong. This measure aligns Hong Kong with the international standards set by the GloBE rules, while also protecting its tax base from being eroded by profit shifting.
Hong Kong’s approach to implementing the HKMTT involves a hybrid legislative strategy. The government plans to incorporate the GloBE rules directly into the Inland Revenue Ordinance, with necessary adaptations to fit the local context. This method ensures clarity, consistency, and adherence to international standards, while maintaining Hong Kong’s competitive tax environment.
For businesses, this means new compliance obligations. The HKMTT will introduce additional reporting and calculation requirements, particularly for those MNEs that meet the EUR 750 million revenue threshold. However, the Hong Kong government is committed to minimizing the compliance burden through simplified reporting and clear administrative guidance.
The introduction of HKMTT is not just about compliance. It’s a strategic move to ensure that Hong Kong retains its position as a leading global financial center. By implementing this tax, Hong Kong ensures that it captures a fair share of tax revenues, while also preventing other jurisdictions from imposing top-up taxes on profits derived from Hong Kong.
The Hong Kong government has been actively engaging with stakeholders, including MNEs and industry experts, to ensure a smooth transition to the new tax regime. This dialogue helps address concerns, clarify uncertainties, and ensure that the HKMTT is implemented effectively without disrupting business operations.
Hong Kong’s adoption of the HKMTT reflects its commitment to global tax fairness and economic resilience. In our next video, we’ll explore the practical implications of the HKMTT on businesses and how they can prepare for its implementation. Stay tuned for insights into the future of Hong Kong’s tax landscape.
