Hong Kong: Implementation of Pillar Two deferred to 2024 at the earliest
Implementation has now been deferred from 2023 to 2024 at the earliest
Implementation has now been deferred from 2023 to 2024 at the earliest
The Secretary for Financial Services and the Treasury issued an open letter on 15 August 2022 that provided an update on the implementation of Pillar Two in Hong Kong and indicated that the implementation has now been deferred from 2023 to 2024 at the earliest.
Key messages of the letter
The key messages of the letter are as follows:
- The implementation of the income inclusion rule (IIR) has been deferred from 2023 to 2024 at the earliest—the government plans to introduce the necessary legislative proposals to the Legislative Council in 2023.
- The government will monitor the implementation status of the undertaxed payment rule (UTPR) in other jurisdictions and review Hong Kong’s own implementation plan.
- The government originally announced in the 2022/23 budget delivered in February 2022 that it would consider introducing a domestic minimum top-up tax in Hong Kong starting from year of assessment 2024/25 (i.e., 1 April 2024)—this will now also be subject to the implementation status of other jurisdictions.
- In the coming months, the government will continue to closely monitor the OECD's latest timetable on the implementation of BEPS 2.0 and the implementation plans of other jurisdictions, and keep stakeholders closely informed of the implementation progress of Hong Kong.
- The government plans to launch a consultation towards the end of 2022 to collect views on the translation of the Pillar Two rules into domestic legislation and the relevant requirements.
KPMG observation
The deferral of implementation of Pillar Two in Hong Kong allows more time for both the government and in-scope multinational groups in Hong Kong to better prepare for the significant challenges Pillar Two implementation will present.
For more information, contact a KPMG tax professional:
David Ling | davidxling@kpmg.com
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