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How Global Minimum Tax Rules (Pillar Two) Impact Hong Kong MNEs & Reporting Requirements
Hong Kong has implemented the OECD’s BEPS 2.0 global minimum tax via the HK Minimum Top-up Tax—here’s what in-scope MNEs must do now to comply under Pillar Two.
By NomadicTax Research Team • 5-8 min read • September 10, 2026
## What is Hong Kong’s Global Minimum Tax (GMT) / HKMTT?
Hong Kong has enacted the **Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Ordinance 2025**, giving legal effect to OECD’s **Pillar Two / GloBE rules**. The law takes effect for fiscal years beginning on or after **1 January 2025**. Under this regime, large multinational enterprise (MNE) groups with **consolidated annual revenue of EUR 750 million or more** are subject to a **15% minimum tax rate**, enforced through two interlocking rules:
- **Income Inclusion Rule (IIR)**: top-up tax may be imposed on parent entities for constituent entities taxed below the minimum.
- **Undertaxed Profits Rule (UTPR)**: acts as a backstop where IIR doesn’t capture all shortfalls. Hong Kong introduces a **HK Minimum Top-up Tax (HKMTT)** to protect its taxing rights. ([ird.gov.hk](https://www.ird.gov.hk/eng/tax/bus_beps.htm?utm_source=openai))
## Compliance & Reporting Requirements
- **Electronic filing mandated** for profits tax returns of in-scope entities (corporate or non-corporate) whose fiscal years begin on or after **1 April 2025** (i.e. 2025/26 onwards). Paper filing allowed only for certain winding-up, amalgamating, or exceptional cases. ([ird.gov.hk](https://www.ird.gov.hk/eng/tax/bus_beps.htm?utm_source=openai))
- **Pillar Two Portal**: Part 4AA entities must file top-up tax notifications, apply for group and joint venture codes, and may designate a local Hong Kong constituent entity to file certain returns on behalf of others. ([ird.gov.hk](https://www.ird.gov.hk/eng/pdf/p2portal/userguides/notification.pdf?utm_source=openai))
- **Use of GIR (GloBE Information Return) schema and safe harbour provisions** to simplify reporting burden. Hong Kong has signed a GIR MCAA to allow group filings where possible. ([ird.gov.hk](https://www.ird.gov.hk/eng/tax/bus_beps.htm?utm_source=openai))
## Practical Strategies for In-Scope MNEs
- Review your corporate structure to identify **low-tax jurisdictions** in your group and anticipate where top-ups may apply.
- Ensure your **financial reporting and tax compliance systems** track effective tax rate (ETR) at the jurisdictional level.
- Evaluate whether to reorganize or restructure holding entities or operations to minimize exposure under UTPR, where apportionments of headcount/tangible assets come into play.
- Explore eligibility for **safe harbour** or simplified filing where possible.
## Example Scenario
Suppose MNE Group X has a subsidiary in Jurisdiction Y taxed at 10%, and Hong Kong constituent entities taxed at 12%; other jurisdictions meet or exceed 15%. Under Pillar Two, HK-parent may face a top-up payable equivalent to the shortfall to reach 15% in Y, but if Hong Kong adopts a QDMTT safe harbour, the HKMTT may allow local bottom-line adjustments. Entity X should also use GIR returns correctly to reflect low ETRs in foreign subsidiaries.
## Key Dates & Action Items
- Identify in-scope groups for tax years beginning **1 Jan 2025 onward**.
- Prepare notifications via **Pillar Two Portal**—get required group/JV codes.
- Update accounting methods and gather jurisdictional tax statistics.
- Monitor legislative developments for any further refinements or compliance guidance.
Implementing the GloBE rules is a major shift for large international groups. With thoughtful preparation and strong internal governance, navigating the global minimum tax regime can be smoothly managed rather than reactive.