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August 17, 2022 Hong Kong delays implementation of OECD Pillar Two rules
The GloBE Rules under Pillar Two of the OECD1 BEPS2 2.0 project seek to introduce a global minimum effective tax of 15% through the Income Inclusion Rule (IIR) and the Undertaxed Payment Rule (UTPR). In line with the delay of the implementation of the GloBE Rules in other jurisdictions, the Hong Kong Secretary for Financial Services and the Treasury (the SFST) has recently confirmed that Hong Kong will also delay the implementation of the IIR from the original OECD timeline of 2023 to 2024 at the earliest. As for the implementation of the UTPR and by extension the domestic minimum top-up tax, the SFST only indicated that he will continue to monitor the implementation targets of other jurisdictions as regards those measures without providing any specific timeline. The SFST also indicated that the Government intends to launch a consultation exercise towards the end of 2022 such that the consultation exercise can benefit from the Implementation Framework for the GloBE Rules, which is scheduled to be released by the OECD later this year. The consultation exercise will then gauge the views of stakeholders on how best to translate the GloBE Rules into the domestic legislation and relevant requirements for the purposes of implementing the GloBE Rules in Hong Kong. Deferral of the implementation timeline will provide more time for in-scope MNEs to review their structures and assess the tax implications thereon, as well as to get prepared in terms of the process and system upgrades for the collation of relevant data for the complex tax reporting and compliance requirements under the GloBE Rules. _________________________________________ For additional information with respect to this Alert, please contact the following: Ernst & Young Tax Services Limited, Hong Kong\
Ernst & Young LLP (United States), Hong Kong Tax Desk, New York
Ernst & Young LLP (United States), Asia Pacific Business Group, New York
Ernst & Young LLP (United States), Asia Pacific Business Group, Chicago
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