Tax News Update    Email this document    Print this document  

February 25, 2022
2022-0327

Hong Kong announces 2022-23 budget

On 23 February 2022, the Financial Secretary (FS) of Hong Kong announced the 2022/23 Hong Kong Budget (Budget). This Alert summarizes the key features of the Budget.

BEPS 2.0 proposals – implementation in Hong Kong

The FS indicated that a legislative proposal will be submitted in the second half of 2022 to implement the global minimum tax rate and other relevant requirements under the OECD's[i] BEPS[ii] 2.0 project from 2023 in accordance with the international consensus. It will only apply to multinational enterprise (MNE) groups with annual consolidated group revenue exceeding €750 million.

To protect Hong Kong's taxing rights and minimize the compliance burdens of in-scope MNE groups, the Hong Kong Government will also consider introducing a domestic minimum top-up tax (DMT) in Hong Kong starting from the year of assessment 2024/25 (i.e., financial year ended falling after 31 March 2024). The DMT will bring the jurisdictional effective tax rates of the Hong Kong constituent entities of an in-scope MNE group to the required minimum of 15%.

Meanwhile, the Hong Kong Government reaffirmed its commitment to preserve the simplicity, certainty and transparency of Hong Kong's tax regime, and to maintain the territorial source principle of taxation.

Proposed tax concessions for family offices set up in Hong Kong

To further enhance Hong Kong's tax attractiveness as a hub for asset and wealth management, the FS announced that an amendment bill will be introduced to provide tax concessions for qualifying family offices in Hong Kong. It is expected that the relevant tax concessions will come into effect in the year of assessment 2022/23 (i.e., financial year ended falling after 31 March 2022).

Proposed tax measures to enhance Hong Kong's position as an international maritime center

Currently, Hong Kong has legislation that provides a tax exemption or half-rate tax concession to ship leasing and marine insurance businesses. To further enhance Hong Kong's position as an international maritime center, the FS announced that similar tax concessions will be introduced in the first half of 2022 to cover other related sectors of the maritime industry, possibly including ship managers, agents and brokers. It is expected that the new tax incentives will require business substance in Hong Kong in accordance with international tax policy standards.

_________________________________________

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

_________________________________________

ENDNOTES

1 Organisation for Economic Co-operation and Development.

2 Base Erosion and Profit Shifting.

 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 1996 – 2024, Ernst & Young LLP

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

EY US Tax News Update Master Agreement | EY Privacy Statement