Cross-border Tax Talks

Pillar Two in Hong Kong SAR: Not yet a sticky wicket?

Doug McHoney (PwC's International Tax Services Global Leader) and Jesse Kavanaugh (PwC Hong Kong SAR’s Tax Reporting & Strategy Leader) met up at PwC’s AsiaPac Global Tax Symposium in Singapore. Jesse is an International Tax Partner in Hong Kong SAR and has been leading the region’s Pillar Two tax efforts. They discuss the state of play of Pillar Two in Hong Kong SAR, trends regarding safe harbours and data collection, modeling and calculations challenges, the centralized and decentralized approaches to Pillar Two inherent to the region, and the Hong Kong SAR legislative process. They also touch on the addition of Hong Kong SAR to the EU’s ‘grey list’ and the recent introduction of the Foreign Source Income Exemption (FSIE) Regime for Passive Income.

Timestamps:

• 1:30 - How did Jesse end up as a practitioner in Hong Kong SAR?
• 3:20 - What is the basic framework of the Hong Kong SAR international tax system?
• 4:30 - Where does Pillar Two currently stand in Hong Kong SAR?
• 6:30 - What guidance is the International Accounting Standards Board (IASB) giving filers regarding Pillar Two?
• 8:40 - What challenges is Jesse seeing from an accounting perspective, particularly issues around deferred assets?
• 11:45 - Any trends from a Hong Kong SAR perspective regarding safe harbours and qualifying data?
• 14:30 - Should taxpayers start with the safe harbours and country-by-country reports before diving into the GloBE income calculation?
• 16:55 - Has it surprised taxpayers that not all of the required Pillar Two information can be found in an ERP system?
• 19:25 - As we think about modeling and calculation challenges, what are some of the issues taxpayers in Hong Kong SAR have been struggling with?
• 21:10 - Are Hong Kong SAR groups centralized or decentralized in their approach to Pillar Two?
• 23:25 - It’s common for Hong Kong SAR groups to have a parent entity in another jurisdiction. How are those types of groups approaching Pillar Two?
• 26:15 - What is the status of Pillar Two enactment in Hong Kong SAR?
• 27:30 - How does the legislative process work in Hong Kong SAR
• 28:40 - What are the details of the newly introduced Foreign Source Income Exemption Regime for Passive Income in Hong Kong SAR
• 33:00 - Any general advice for taxpayers?

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