Hong Kong & The Multilateral Convention

The Multilateral Convention

The Hong Kong SAR government is acting to implement the Multilateral Convention on Implementing Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting.

The OECD developed the convention to ensure swift, coordinated and consistent implementation of its tax treaty-related base erosion and profit-shifting measures in a multilateral context.

The Multilateral Convention is one of the 15 recommended actions from the Organization for Economic Co-operation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) project.

It enables fast and steady implementation of the tax treaty-related recommendations under BEPS – hybrid mismatches (Action 2), tax treaty abuse (Action 6), permanent establishments (Action 7) and dispute resolution (Action 14).

The Inland Revenue (Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting) Order was tabled at the Legislative Council on 19 October for negative vetting.

The Government of the People’s Republic of China’s Role

In May 2022, China started with its approval with the OECD.

The Chinese government extended the application of the MLI to Hong Kong and its provisions will take effect here after the completion of domestic legislative procedures.

Hong Kong has listed 39 countries it has signed DTAs with as countries intended to be covered by the MLI.

The remaining six DTAs have already included BEPS-compliant provisions.

The MLI will take effect in Hong Kong concerning covered DTA’s at the beginning of April 2023 for taxes withheld at source or 1 April 2024 for other taxes.

Next steps

If you have any general queries about this article on the MLI or Hong Kong tax matters, please do not hesitate to get in touch.