Direct Tax

Global minimum tax and Hong Kong minimum top-up tax for multinational enterprise groups 3

In July 2021, Hong Kong joined more than 130 jurisdictions in accepting the international tax reform framework of a two-pillar solution announced by the Organization for Economic Co-operation and Development (OECD) to tackle base erosion and profit shifting risks arising from the digitalization of the economy (commonly known as BEPS 2.0). To fulfil Hong Kong’s international obligation to tackle cross-border tax evasion and safeguard our taxing rights, the Financial Secretary announced in the 2024-25 Budget that Hong Kong would implement the global minimum tax in accordance with the BEPS 2.0 framework promulgated by the OECD, and a related Hong Kong Minimum Top-up Tax (HKMTT) from 2025 onwards.

The Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Ordinance 2025 (the Amendment Ordinance) was enacted on 6 June 2025 to give effect to the initiative.

Pillar Two of BEPS 2.0

Under Pillar Two of BEPS 2.0, a global minimum tax of 15% is imposed on Multinational Enterprise (MNE) groups with annual consolidated revenue of EUR 750 million or above in at least two of the four fiscal years immediately preceding the current fiscal year (i.e. in-scope MNE groups) through two interlocking rules, namely:

Income Inclusion Rule (IIR) – the primary rule which imposes top-up tax on the parent entity of an in-scope MNE group in respect of its constituent entities which are taxed at an (ETR) below 15% (i.e. low-taxed constituent entities) outside the jurisdiction where the parent entity is located; and

Undertaxed Profits Rule (UTPR) – a backstop to IIR which ensures that all top-up tax is charged where any of such tax is not brought into charge under IIR.

The two rules are together referred to as the Global Anti-Base Erosion (GloBE) rules. They seek to ensure that in-scope MNE groups pay a minimum tax of 15% in respect of the profits derived from every jurisdiction in which they operate, thereby reducing the incentive for large MNE groups to shift profits to low- or no-tax jurisdictions to reduce tax. They also place a floor under tax competition, where jurisdictions lower their corporate income tax rates to compete for capital and investment.

The GloBE rules allow jurisdictions to introduce their own qualified domestic minimum top-up tax (QDMTT) based on the GloBE mechanics. A jurisdiction in which an in-scope MNE group operates and for which the ETR is below the minimum rate (i.e. a low-tax jurisdiction) has the first priority to collect the top-up tax in respect of the low-taxed constituent entities in its own jurisdiction if it has implemented its own QDMTT; otherwise, the top-up tax will be collected by another jurisdiction through the imposition of IIR or UTPR.

3. https://www.ird.gov.hk/eng/tax/bus_beps.htm#a02

Indirect Tax

Tanzania: VAT proposals in 2025-2026 budget

Excerpts from various sources

Tanzanian Ministry of Finance and Planning announced the following VAT related proposals during the Budget for the forthcoming fiscal year:

VAT exemptions:

  • Pesticides falling under HS Codes 3808.61.00, 3808.62.00, and 3808.69.00.
  • Edible oil produced using locally grown seeds, for one year.
  • Tractor tires used in agricultural activities (HS Code 4011.70.00), dime liners (HS Code 39.20), forks (HS Code 8201.90.00), rakes (HS Code 8201.30.00), and axes (HS Code 8201.40.00). This exemption will be subject to approval from the Minister responsible for Agriculture.
  • Re-insurance transactions between insurance and re-insurance companies.
  • Cooking Gas Tanks and cylinders under HS Codes 7311.00.10, and carbonization furnaces (HS Code 8417.80.00) used in the production of briquettes.
  • Natural gas sold to CNG stations for motor vehicles use.
  • Locally published newspapers.

VAT rate changes:

  • Reduction in VAT rate from 18% to 0% on textile products specifically fabric and garments made from locally grown cotton, for a period of one year.
  • Zero rating of supplies of locally produced fertilizers for a period of three years.
  • Reduction in VAT rate from 18% to 16% for payment made online - Business to Customer (B2C).

Widened tax base:

  • Repeal of VAT exemption on bitumen under HS Code 2713.20.00 and 2715.00.00
  • Repeal of VAT exemption on game supplies.
  • Inclusion of online marketplace platforms and network marketing platforms in the scope of ‘online intermediation services.’

Mauritius: Highlights of Budget 2025-26

Excerpts from various sources

  • VAT Registration Threshold: From 1 October 2025, the VAT registration threshold will be reduced from MUR 6 million to MUR 3 million, bringing more businesses under the VAT net.
  • Mandatory VAT for Pleasure Craft Operators: Operators with a Pleasure Craft Licence (issued by the Tourism Authority) must register for VAT regardless of turnover.
  • E-invoicing for Large Businesses: Businesses with an annual turnover above MUR 80 million in FY 2025–26 will be required to implement e-invoicing.
  • Input VAT on Parking: Input VAT on rented parking spaces can only be claimed if the parking is used exclusively for business purposes.

Singapore revises GST Registration Rules to allow prospective assessment

Excerpts from various sources

With a view to improving GST compliance and aligning with business planning cycles, Singapore has revised its GST registration framework. The key changes are as follows:

  • Prospective GST Registration: Businesses can register for GST prospectively if taxable turnover is reasonably expected to exceed SGD 1 million in the next 12 months.
  • Revised Effective Date of Registration: Under the new rules, GST registration will take effect two months after the forecast date, thus replacing the earlier requirement to register within 31 days of becoming liable.
  • Charging of GST: Businesses will be permitted to charge GST only after the effective registration date (i.e., post the two-month period).
  • Requirement for Supporting Evidence: Forecasts must be substantiated with concrete documentation, such as signed contracts, purchase orders, or other formal confirmations. Speculative or unsubstantiated projections will not be accepted.

Transfer Pricing

Mutual Agreement Procedure – United Arab Emirates (UAE)

With an intention to resolve the international tax disputes to eliminate double taxation and to prevent evasion of taxes, two contracting countries enters into an international agreement which is Double Taxation Agreement (DTA). The legal existence of MAP arises form DTA. It serves as a remedy for resolving international tax disputes which includes issue of interpretation, application of DTA and for issues leading to double taxation.

UAE currently has over 100 DTAs in force with other contracting states across globe. The clauses of MAP are in accordance with Article 25 of the OECD Model Tax Convention (MTC). UAE's Competent Authority (CA) is responsible for administrating the MAP process. MAP proceedings operate independent of the Federal Tax Authority (FTA) and focuses on eliminating double taxation through negotiation and agreement.

Eligibility under MAP: Wherein the actions of one or both of the Contracting States results in taxation not in accordance with the DTA, MAP would assist in resolving the same. The illustrative scenarios are as below:

  • Transfer pricing disputes leading to economic double taxation.
  • Dual residency cases for individuals or entities.
  • Attribution of profits to a permanent establishment across jurisdictions.
  • Disputes involving anti-abuse provisions or multilateral tax issues.

Procedure for Filing a MAP claim: To initiate MAP, the taxpayers are required to submit detailed and accurate information as prescribed to the UAE CA which includes but are not limited to the following:

  • Taxpayer and foreign counterparty details.
  • DTA provisions believed to be misapplied.
  • Supporting documentation such as transfer pricing reports, tax assessments, residency certificates, and prior correspondences.
  • Any domestic remedies pursued or pending etc.

The submission of MAP claim shall be signed by the taxpayer, or a delegated authorized person, confirming that all information and documentation provided in the MAP request is accurate, Any additional information may be asked by UAE CA within 2 months and the taxpayer should submit the same within one month. Failure to submit such additional information, the MAP process may be discontinued by UAE CA. MAP can be applied for multiyear also subject to the facts and circumstances of the issues remains same. At any time, the taxpayer can choose to withdraw its MAP claim after notifying the UAE CA.

Assessment: The UAE CA shall verify the completeness, validity of MAP application, objections raised and shall provide its decision for accepting/ rejecting within 2 months.

Unilateral Relief and Bilateral Negotiations: If the MAP claim is accepted and the objection is justified to the UAE CA, the CA will first assess whether it can provide relief unilaterally. If not, the UAE CA will then commence bilateral protocols and seek to resolve the case by mutual agreement with the corresponding CA.

Outcome of MAP: Upon conclusion, the UAE CA will notify the taxpayer within two months. The taxpayer must intimate its acceptance or rejection within one month. Upon acceptance, the taxpayer shall withdraw all domestic remedies. The UAE CA and taxpayer will share written acceptance with the FTA for further implementation. In case of non-acceptance by taxpayer, the MAP claim is considered closed. The taxpayer in such cases will be free to pursue or resume other available domestic remedies in the UAE or the other jurisdiction, where relevant.

Conclusion

With the introduction of Corporate Tax and Transfer Pricing rules in UAE, the cross-border tax issues would be on the rise. Introduction of MAP would serve as a fundamental mechanism for resolving international tax disputes.

Tax Street June 2025