Hong Kong is likely to amend its tax regime to align with the OECD’s proposals to ensure that large businesses pay a minimum level of tax of 15%, regardless of where they operate.
At a webinar on 1 September, Ivor Morris, Partner at KPMG, said that the proposals, commonly known as BEPS 2.0, would involve the imposition of a global minimum effective tax rate of at least 15% on groups with a turnover in excess of 750 million euros. He explained that there will be knock-on effects on domestic tax rules from such a global tax reform, as existing tax breaks and incentives in Hong Kong generally result in an effective tax rate for large businesses of below 15%. This means Hong Kong would no longer to be able compete as a low-tax jurisdiction and will have to work on improving its non-tax offerings if it is to remain attractive to international businesses.
Companies looking to obtain Hong Kong tax residency might be required to provide evidence of their commercial substance in the SAR, such as whether the number of employees is proportionate to the level of activity carried out in the city.
At a webinar on 13 July, Kenneth Wong, Tax Partner at PwC, guided members through the process of applying for a Hong Kong tax resident certificate to be able to claim the benefits granted under the SAR’s tax treaties. He also explained how the applications might be impacted by the imposition of travel restrictions and remote work during the COVID-19 pandemic.
He was joined by fellow Senior Tax Manager Horace Wan, who spoke on the Mainland’s latest policy on assessing beneficial ownership statutes and its effect on the vetting of Hong Kong tax resident certificate applications. He also provided case studies on the Inland Revenue Department’s approach to reviewing these applications.
Following Financial Secretary Paul Chan’s 2021-2022 Budget Speech to the Legislative Council in late February, a panel of experts discussed his plans at a webinar on 9 March. Louis Kuijs, Head of Asia Economics at Oxford Economics; Heiwai Tang, Professor of Economics at the University of Hong Kong; Tony Miller, Chairman of the Chamber's Economic Policy Committee; and Alice Leung, Chairman of the Chamber's Taxation Committee, shared their views and insights on the Government’s latest Budget, which was delivered amid unprecedented economic conditions for Hong Kong. The speakers also discussed how the Government could bolster public finances after the recent surge in spending to fight the effects of the coronavirus, and take a more active role to achieving economic transformation.
Taxpayers who appeal their tax assessment before the Board of Review may be aware that they could be ordered to pay legal expenses of not more than HK$25,000. But the actual cost of appeal could be much higher than that, as both appellants and the Inland Revenue Department have the right to challenge the Board’s decision and take their cases as far as the Court of Final Appeal.
At a webinar on 22 January, Wilson Cheng, Partner at EY, explained the procedure in lodging an appeal with the Board of Review, and shared a number of cases to help members better understand the Board’s rulings. He explained that the total cost of appeal could exceed HK$10 million if a case ended up in the highest court. Companies were advised to ensure they had the financial wherewithal to do so before filing a tax appeal.