Pillar Two – a Quick Recap

Pillar Two introduces global minimum tax rules which apply to multinational enterprise (“MNE”) groups with consolidated revenue of at least EUR 750 million in at least two of the four fiscal years immediately preceding the tested fiscal year. 

The minimum tax rate is initially set at 15% and the resultant Pillar Two “top-up tax” will be payable either by the ultimate parent entity or an intermediate parent within the group structure. 

The Global Anti-Base Erosion (“GloBE”) rules allow jurisdictions to introduce their own qualified domestic minimum top-up tax (“QDMTT”) based on the GloBE mechanics. Consequently, some jurisdictions, including Hong Kong, will collect tax locally through a QDMTT.

These rules are one of the key outcomes of the GloBE project led by the Organisation for Economic Co-operation and Development (“OECD”) over the past decade.

Developments in Hong Kong

On 6 June 2025, Hong Kong enacted the Inland Revenue (Amendment) (Minimum Tax for Multinational Enterprise Groups) Ordinance 2025, which codifies the Income Inclusion Rule (“IIR”) and Hong Kong Minimum Top-up Tax (“HKMTT”). These measures are effective retrospectively for fiscal years beginning on or after 1 January 2025. The implementation of the Undertaxed Profits Rule (“UTPR”) has been deferred for further review.

MNE groups with a presence in Hong Kong should evaluate the impact of the Pillar Two rules for tax provisioning and compliance purposes. Notably, electronic filing (e-filing) of Profits Tax returns will become mandatory for all Hong Kong constituent entities of in-scope MNE groups starting from the Year of Assessment 2025/26.

To facilitate compliance with the Pillar Two requirements and e-filing of Profits Tax returns in Hong Kong, the Inland Revenue Department (“IRD”) issued letters in late September 2025 to potentially in-scope MNE groups in Hong Kong, requesting responses within two months.

Key Compliance Actions for In-Scope MNE Groups

Under the Hong Kong Pillar Two requirements, in-scope MNE groups should prepare early, take prompt actions and seek professional advice from tax advisors where needed. The key compliance requirements and indicative timelines are summarised below:

Where Should You be Now?

MNE groups falling within the Pillar Two scope must be prepared to calculate top-up tax and meet their reporting obligations across multiple jurisdictions. Businesses should undertake the following actions in the coming months:

• Forecasting the impact of Pillar Two and establish a robust audit position
  Identify relevant group entities and jurisdictions, determine whether transitional safe harbours apply, and quantify potential top-up tax, relevant tax provisions, and necessary disclosures in financial statements.
• Determining the timeline and identify responsible parties
  Establish clear timelines and accountability for the preparation and filing of notifications, local returns and the GloBE return across multiple territories, ideally supported by technology-enabled monitoring solutions.
• Resolve complex issues early
  Understand how the Pillar Two rules apply to complex issues that may be impacted by the MNE group’s accounting and tax treatments. For example, businesses may need to address areas such as acquisitions and demergers, participation in new tax incentive regimes and the treatment of transfer pricing adjustments.

A Multi-faceted Practical Solution

RSM’s Pillar Two team supports multinational clients across different sectors and stages of their Pillar Two journey. We coordinate across disciplines and jurisdictions to help businesses develop a tailored Pillar Two strategy aligned with their tax risk profile, internal resources, and systems and technology capabilities.