Preparing for Hong Kong’s Minimum Top-Up Tax (HKMTT) – Coming in 2025 With the HKMTT set to roll out in 2025, businesses with consolidated revenues of EUR 750 million or more must start preparing now. In this video, we guide you through the essential steps for compliance, including:
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Preparing for HKMTT: What Businesses Need to Know
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As the 2025 implementation of the Hong Kong Minimum Top-Up Tax (HKMTT) approaches, businesses need to start preparing now. In this video, we’ll walk through the practical steps that MNEs operating in Hong Kong should take to ensure compliance with the new tax rules.
The first step for businesses is to determine if they fall within the scope of the HKMTT. This tax applies to MNEs with annual consolidated revenues of EUR 750 million or more. If your business meets this threshold, you’ll need to start calculating your Effective Tax Rate (ETR) in Hong Kong.
To calculate your ETR, divide the total covered taxes by your net GloBE income in Hong Kong. If the ETR is below 15%, you will be required to pay a top-up tax to reach the minimum rate. This ensures that your Hong Kong operations are contributing their fair share to the local tax base.
One of the challenges businesses might face is the complexity of integrating the GloBE rules into existing tax systems. The Hong Kong government is aware of this and is providing administrative guidance to help businesses navigate these new requirements. Simplified reporting processes and clear guidelines will be introduced to ease the transition.
Effective tax planning will be crucial in this new environment. Businesses should review their current structures and consider how the HKMTT might impact their overall tax strategy. This might involve revisiting transfer pricing policies, reassessing profit allocation across jurisdictions, and exploring opportunities for utilizing the Substance-Based Income Exclusion (SBIE) to reduce potential top-up tax liabilities.
Despite the introduction of the HKMTT, Hong Kong remains one of the most competitive places to do business, thanks to its low tax rates, strategic location, and robust legal framework. The HKMTT is designed to complement, not undermine, these advantages, ensuring that Hong Kong continues to attract and retain global businesses.
As the HKMTT implementation date draws nearer, staying informed and proactive is key. Businesses operating in Hong Kong should start preparing now to ensure a smooth transition to the new tax regime. Engage with tax advisors, review your tax strategies, and make sure you’re ready for 2025.
