Category: 3. Business

The US labor market picked up in March as employers showed signs of resilience amid the US-Israel war in Iran.

After an extraordinary contraction in February, employers added 178,000 jobs last month, ahead of economists’ expectations of about 70,000.

The unemployment rate fell to 4.3%, according to data from the US Bureau of Labor Statistics. In February, the economy lost 133,000 jobs, according to revised figures. Job figures for January were revised up, from 126,000 to 160,000. With revisions, total employment in January and February is 7,000 lower than previously reported. .

Previous data painted a mixed picture of the US labor market, which economists say has been in a static “low-fire, low-hire” state, where both layoffs and new hires are down.

Outplacement firm Challenger, Gray & Christmas found that employers announced 217,362 job cuts in the first quarter of 2026 – the lowest total for that period since 2022. But hiring in February slowed to a six-year low, according to data released earlier this week, with dips seen in construction and leisure and hospitality.

The so-called “quits rate” fell to 1.9%, the lowest since 2020, suggesting that uncertainty in the labor market has prompted more workers to stay put at their jobs.

The trend follows sluggish overall growth in the US jobs market since last year. In 2025, just 116,000 jobs were added to the economy for the entire year – around the same number that was added per month in previous years.

The slowdown points to caution among employers, particularly as consumer inflation experienced whiplash over the last year. US inflation dipped down to 2.3% in April 2025 before jumping to 3% in September. Price increases have been steady at 2.4% since the start of this year, though the US-Israel war with Iran is expected to drive inflation higher if the fallout continues to grow. Last month, US average gas prices broke through $4 a gallon, and the squeeze on oil and gas is expected to trickle into other industries.

The oil price shock is reminiscent of higher prices that were seen in 2022, after Russia invaded Ukraine. US average gas prices reached $5 a gallon at the time while inflation reached a generational high of 9%. Experts say that every $10 increase in the price of a barrel of oil can lead to 0.2% climb in inflation.

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Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 15.7% since reporting. It currently trades at $185.17.

Is now the time to buy VSE Corporation? Access our full analysis of the earnings results here, it’s free.

Founded in 1952, Distribution Solutions (NASDAQ:DSGR) provides supply chain solutions and distributes industrial, safety, and maintenance products to various industries.

Distribution Solutions reported revenues of $481.6 million, flat year on year, falling short of analysts’ expectations by 3%. It was a disappointing quarter as it posted a significant miss of analysts’ revenue estimates and a significant miss of analysts’ EBITDA estimates.

As expected, the stock is down 10.3% since the results and currently trades at $26.66.

Read our full analysis of Distribution Solutions’s results here.

Founded in NYC’s Little Italy, MSC Industrial Direct (NYSE:MSM) provides industrial supplies and equipment, offering vast and reliable selection for customers such as contractors

MSC Industrial reported revenues of $917.8 million, up 2.9% year on year. This result lagged analysts’ expectations by 1.6%. It was a softer quarter as it also produced a miss of analysts’ revenue estimates and a miss of analysts’ adjusted operating income estimates.

The stock is down 2.1% since reporting and currently trades at $90.33.

Read our full, actionable report on MSC Industrial here, it’s free.

Serving the pharmaceutical, industrial manufacturing, energy, and chemical process industries, Transcat (NASDAQ:TRNS) provides measurement instruments and supplies.

Transcat reported revenues of $83.86 million, up 25.6% year on year. This number surpassed analysts’ expectations by 4.1%. However, it was a slower quarter as it recorded a significant miss of analysts’ EBITDA estimates and a significant miss of analysts’ EPS estimates.

The stock is up 20.1% since reporting and currently trades at $76.07.

Read our full, actionable report on Transcat here, it’s free.

Late in 2025 into early 2026, there was hand wringing around artificial intelligence. For software companies, the fear was that AI would erode pricing power and compress margins as new tools made it easier to replicate what once required expensive enterprise platforms. Crypto investors had their own version of the same anxiety: if AI agents could trade, allocate capital, and manage wallets autonomously, what exactly was the long-term value of today’s crypto infrastructure?

These concerns triggered a noticeable rotation away from these sectors and into safer havens. But markets rarely dwell on one narrative for long. Spring 2026 came, and the focus shifted abruptly from technological disruption to geopolitical risk. The US’ conflict with Iran became the dominant driver of market psychology, and when geopolitics takes center stage, the script changes quickly. Investors stop debating growth rates and start worrying about oil supply, inflation, and global stability.

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Data center construction is expanding rapidly across the U.S., driven by surging artificial intelligence (AI) adoption and the resulting need for computing power. Investment is accelerating alongside construction, with annual data center project spending reaching $14 billion in July 2025 — a 100% increase over the prior year. 

Comprehensive tax and financial forecasting helps prevent overspending and leaving potential savings on the table, making it essential for projects with such high levels of investment. Depreciation planning plays a central role in those efforts because data centers contain numerous specialized and redundant systems, all of which depreciate at different rates. Neglecting to account for those differences can cause companies to miss strategic tax planning opportunities and could increase their overall tax burdens. 

This installment of BDO’s Data Center Dangers series explores how facility owners can leverage cost segregation analyses to help conduct depreciation planning, reduce their total tax liability, and capture all available tax savings.

Understanding Depreciation Schedules 

At a basic level, depreciation is the act of expensing the cost of an asset over its usable life. Under federal tax rules, nonresidential real property, such as commercial property, is expensed over 39 years, but some individual building elements can be depreciated using five-, seven-, or 15-year recovery periods. Assigning the appropriate depreciation methods and recovery periods to property is crucial because depreciation can significantly affect after-tax costs and long-term project economics. 

Data centers combine real estate, industrial infrastructure, and advanced technology systems under one roof. Because those elements depreciate at different rates, depreciation planning can be more complex for data centers than other commercial projects such as office building or retail spaces. 

Recent tax law changes add another layer of complexity to depreciation planning. The One Big Beautiful Bill Act (OBBBA), passed in 2025, restored 100% bonus depreciation, which had been slated to sunset. Bonus depreciation allows companies to immediately deduct 100% of the purchase price of eligible assets, so its reinstatement opens the door to substantial savings for data center owners that set themselves up to claim them. 

Tangible property, computer software, and other assets with a class life of no more than 20 years — categories that encompass many of a data center’s systems — are eligible for bonus depreciation. Common data center assets that fall under this umbrella include specialized components (for instance, electrical and HVAC systems), as well as office equipment, such as computers and AI chips. 

Bonus depreciation eligibility also extends beyond new construction. Many data center projects involve renovations to existing structures, which can be treated as 15-year, bonus eligible qualified improvement property (QIP). 

However, data center owners must also consider state-level variations on bonus depreciation. California, for instance, does not conform to federal bonus depreciation rules. Further, states must determine whether they will decouple from the OBBBA, with several states having already decoupled in whole or part. Those decisions will affect bonus depreciation options for data centers. 

To take advantage of depreciation opportunities and maintain compliance with state tax filing standards, data center owners need to know how much money they are spending on each depreciable asset. Conducting a cost segregation analysis allows companies to itemize individual project expenses and gain full visibility into their depreciation options. 

What is Qualified Improvement Property (QIP)?

Some building or structural upgrades, known as QIP, are QIP, are depreciable over 15 years, making them eligible for 100% bonus depreciation. But QIP comes with its own nuances that businesses must understand. Elevators, building expansions, or any exterior improvements do not count as QIP, while electrical systems, flooring, and HVAC systems inside a building — all common to data center projects — might qualify. 

State conformity related to QIP also varies. For example, consistent consistent with its decoupling from federal bonus depreciation rules, California also does not recognize QIP as 15-year property. As such, data centers in California risk losing both federal QIP treatment and the ability to properly classify five-year property for state purposes unless they conduct a cost segregation analysis. Doing so will allow them to break out costs in a format that is acceptable to federal and state taxing authorities, allowing for greater tax planning flexibility. 

Cost Segregation Analysis 

Cost segregation is a tax planning technique that can increase cash flow by accelerating the federal tax depreciation of construction-related assets over five-, seven-, and 15-years instead of 27.5 or 39 years. By breaking out individual costs rather than grouping them all together, data center owners can make more strategic tax planning decisions regarding when and how to depreciate an asset. Without a cost segregation study, property with a tax depreciable recovery period of less than than 20 years might be classified alongside longer-lived assets, eliminating eligibility for bonus depreciation and forfeiting potential tax savings. 

A final cost segregation study cannot occur until a project is completed, but companies should start preliminary analyses at the outset. Breaking out costs early in the process can reduce the need for retroactive work and allow for more precise spend tracking than a price tag that does not include per-item details. Ideally, owners should work with their general contractors — who will have the highest level of line-by-line cost visibility — to break out costs within initial construction contracts. 

From there, owners can elect into or out of bonus depreciation by class life, depending on their business and tax planning priorities. They can also use the cost segregation to properly classify spending categories for other federal and state tax purposes, as well as general financial planning and recordkeeping. For example, a company might not elect to take 100% bonus depreciation for every piece of data center property. Instead, it might choose to forgo bonus depreciation for specific asset classes to better align with business priorities such as cash flow or anticipated future income. Making such strategic decisions is not possible without a robust cost segregation analysis that assigns accurate dollar values to each asset category. 

Standing before a friendly crowd in March, Elon Musk laid out his plan for the future of his companies, and it was literally out of this world.

Musk announced that his space-launch company, SpaceX, which had recently merged with his artificial intelligence company, xAI, would put data centers into orbit around the Earth.

It all comes down to electricity, he explained. “You’re power constrained on Earth,” he said. “Space has the advantage that it’s always sunny.”

Musk envisions legions of data-crunching satellites spinning around the planet, powering the AI revolution from above. It’s the perfect pitch for taking SpaceX public. This week, Bloomberg reported that the company had filed documents confidentially to the Securities and Exchange Commission with the goal of going public this summer.

Musk also claims it makes financial sense. “I actually think that the cost of deploying AI in space will drop below the cost of terrestrial AI much sooner than most people expect,” he said. “I think it may be only two or three years.”

Others are skeptical. Musk’s timeline is “an optimistic interpretation,” according to Brandon Lucia, a professor of electrical and computer engineering at Carnegie Mellon University who specializes in putting computers on satellites. The napkin math looks appealing, and power is free up there after all — but it turns out there are a lot of obstacles to building a data center among the stars.

A global power problem

Here on Earth, the problem is glaring: AI is gobbling up electricity around the globe. Global data-center power consumption is expected to roughly double to nearly 1,000 terawatt-hours by the end of the decade, according to an estimate by the International Energy Agency.

High-voltage transmission lines provide electricity to data centers in Ashburn, Virginia. Globally, data centers’ demand for electricity is expected to roughly double by 2030.

Ted Shaffrey/AP

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Ted Shaffrey/AP

To fill the gap, some companies are building dedicated gas turbines, while others are investing in nuclear technology. It’s not enough, according to Philip Johnston, CEO and co-founder of Starcloud, which is seeking to build orbital data centers.

“We’re very quickly running up on constraints on where you can build new energy projects terrestrially,” Johnston said. “Within six months, they’ll just be leaving chips in warehouses because they don’t have power for turning them on.”

Starcloud launched its first spacecraft last fall with an Nvidia H100 chip on board. The company demonstrated the ability to run a version of Google’s Gemini AI from space, and it plans to launch a second spacecraft in October. “That one has 100 times the power generation of the first one,” Johnston said, though it’s still expected to generate only around 8 kilowatts of power.

Google is also pursuing the idea of building data centers in space through a project known as Suncatcher. It envisions an 81-satellite cluster that it plans to build in partnership with the satellite-imagery company Planet. Two prototype satellites will launch in early 2027, according to the companies.

“Orbital data centers are an idea whose time has come,” Will Marshall, Planet’s CEO, wrote to NPR in an email. “When exactly it will be more cost efficient than terrestrial ones is debatable but now is the time to be working on this.”

Everything must get bigger

To go from a handful of prototype satellites to something useful is not so easy. For one thing, the power requirements of the microchips used for artificial intelligence are enormous.

To get a sense of just how much power is needed, consider the largest power-producing facility in space right now: the International Space Station (ISS).

The solar panels of the ISS are around half the size of a football field and produce around 100 kilowatts of average power, according to Olivier de Weck, a professor of astronautics at the Massachusetts Institute of Technology. “It’s basically the amount of power that a single big car engine produces.”

To replicate a 100-megawatt data center in space would require a facility that’s 500 to 1,000 times, depending on the orbit.

“Is that feasible? Yeah, I think it’s feasible, but not next year and certainly not in three years,” he said.

A slide from Elon Musk’s presentation shows his concept of an “AI Sat Mini” that is larger than SpaceX’s Starship rocket.

Screenshot by NPR/SpaceX

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Screenshot by NPR/SpaceX

And power is not the only requirement; the satellites also have to provide cooling to the microchips. While it’s true that space is cold, it’s also a vacuum. This means that when a satellite gets hot, there’s no easy way to get rid of that heat — it just builds up.

“All of that heat that the computer generates has to be dispelled,” said Rebekah Reed, a former NASA official now at Harvard University’s Belfer Center for Science and International Affairs.

The best solution is radiators, which move liquids out to giant panels where the heat can be dissipated. So in addition to solar panels, an AI satellite would need another set of large radiators.

“When you put those massive radiators together with massive solar arrays that are required in order to power and cool, you’re actually talking about really large satellites, or very, very large satellite constellations,” Reed said.

An alternative is to build smaller satellites and fly them in preset formations called constellations. Such constellations allow the heat and power problems to be distributed, but to work, the satellites would need to send huge amounts of data back and forth. That likely means using lasers to beam data between satellites. But even moving at the speed of light, the time it takes to get data from one satellite to another is long enough to slow down computing.

Google’s Project Suncatcher proposes flying groupings of satellites in extremely tight clusters to reduce that latency. Musk, meanwhile, has proposed launching upward of a million satellites and placing them in orbit around Earth’s poles. He recently unveiled the first generation “AI Sat Mini” spacecraft — with solar arrays spanning roughly 180 meters (about 600 feet) — during his presentation.

Launching all that into space would cost money — lots of money. At the moment, it can cost around $1,000 per kilogram to launch a satellite into orbit. Google believes that cost must drop by at least a factor of five to $200 per kilogram before data centers in space will begin to make sense.

SpaceX’s megarocket Starship blasts off for a test flight from Starbase in Boca Chica, Texas, on Oct. 13, 2025. Starcloud CEO Philip Johnston says Starship is central to building orbital data centers. He told investors: “If you don’t think Starship’s going to work, don’t invest in us — that’s totally fine.”

Eric Gay/AP

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Eric Gay/AP

Musk thinks he can do it with his new Starship rocket, which is still in development. Starcloud’s Johnston says Starship is central to more than just SpaceX’s vision. He told investors: “If you don’t think Starship’s going to work, don’t invest in us — that’s totally fine.”

Upgrading the server

Even if a company could get a data center into space, running it would involve a lot more than just moving microchips into orbit.

Data centers on Earth are not just static buildings full of chips humming away, says Raul Martynek, the CEO of DataBank, a company that maintains 75 data centers, primarily located in the United States. They require constant maintenance and upgrades, all of which is done by workers.

Take DataBank’s IAD1 data center in Ashburn, Virginia. The facility is 144,000 square feet filled with rows and rows of black computer cabinets, which are filled with microprocessors. It’s fairly run-of-the-mill, as these facilities go, but it still consumes around 13 megawatts of power at any given moment (that’s 130 times more than the International Space Station).

“We have vendors here every single day,” says James Mathes, who manages IAD1.

Workers are constantly in and out of these data centers, installing new servers, upgrading microchips and fixing things. And to stay competitive, space data centers would need to do much of the same.

Some of that could be done through software, and Musk points out that chips can be rigorously tested on the ground before they’re sent aloft. But the fact remains that the companies that rent data centers often want to access them physically for one reason or another.

Martynek, who has spent decades in telecom, says he’s not worried about space data centers taking business from his company.

“It seems like there’s a lot of ifs and a lot of advancements that would have to occur, and I find it kind of hard to believe that all that could happen in two or three years,” he said. “No one in data center land is losing any sleep.”

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Everus Construction Group (ECG) reported earnings and revenue above forecasts, along with a record backlog that highlights strong booked work and has drawn investor attention to demand in data center, transmission, and distribution projects.

See our latest analysis for Everus Construction Group.

The latest moves in Everus Construction Group’s share price tell a story of building momentum, with a 7.6% 7 day share price return and a 38.9% year to date share price return sitting alongside a very large 1 year total shareholder return of 250.8%. Investors are absorbing strong earnings, acquisitions, and sector wide interest in construction names, with the stock at a last close of $123.88.

If the demand Everus is seeing in data centers and grid projects has caught your attention, it may be worth scanning for other infrastructure beneficiaries through our AI infrastructure stocks screener, starting with 36 AI infrastructure stocks.

With the shares already up 38.9% year to date and trading near a US$129.40 analyst target, the key question now is simple: are you looking at an undervalued compounder in infrastructure or a stock where markets are already pricing in future growth?

Everus Construction Group’s most followed narrative points to a fair value of $105.67, below the last close of $123.88. This frames the current debate around expectations already embedded in the price.

Escalating power infrastructure needs tied to data centers, electric vehicles, industrial reshoring and undergrounding are supporting sustained T&D backlog growth and higher revenue visibility, reinforcing multi year revenue expansion.

Read the complete narrative.

Want to see what growth path justifies paying above the implied fair value? The narrative leans heavily on steady expansion, firm margins and a future earnings base that needs to support a premium earnings multiple. Curious which assumptions really carry the weight in that calculation and how sensitive the fair value is to even small changes in these inputs? The full narrative lays that out in detail.

Result: Fair Value of $105.67 (OVERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, this upbeat story can crack if data center projects slow or acquisitions fail to deliver expected synergies, which could challenge the current premium pricing.

Find out about the key risks to this Everus Construction Group narrative.

With sentiment clearly optimistic so far, this is the moment to check the numbers yourself, move quickly if you wish, and weigh up 3 key rewards

If Everus has sharpened your focus on quality, do not stop here. Use the Simply Wall Street Screener to spot other opportunities that might suit your portfolio.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include ECG.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Pillar Two Compliance in Hong Kong requires constituent entities of in-scope MNE groups to meet specific filing obligations, deadlines, and mandatory e-filing requirements under the GloBE rules and Hong Kong minimum top-up tax (HKMTT). With the regime now operational, this guide covers the top-up tax return and notification procedures, penalties for non-compliance, mandatory e-filing through the IRD’s Pillar Two Portal, and key practical considerations for MNEs preparing for their first filing cycle.

Hong Kong began implementing the OECD’s Pillar Two global minimum tax rules for fiscal years starting on or after January 1, 2025. The rules, which generally apply to the Hong Kong-based constituent entities of multinational enterprise (MNE) groups with consolidated annual revenue of at least €750 million in two of the last four fiscal years, impose new reporting and top-up tax obligations under the GloBE rules and the Hong Kong minimum top-up tax (HKMTT). 

With the regime now in force, in-scope MNEs should begin preparing early asHong Kong requires both an annual top-up tax notification and a top-up tax return, with deadlines determined by the group’s reporting fiscal year-end. On January 19, 2026, the Inland Revenue Department (IRD) launched the first phase of the Pillar Two Portal, requiring electronic submission of required top-up tax returns and notifications and marking the start of Hong Kong’s mandatory e-filing framework for Pillar Two compliance. 

This is the second in our two-part series on Hong Kong’s implementation of the Pillar Two global minimum tax. To see the requirements for companies in Hong Kong under the GloBE rules, see Part I: A Guide to Global Minimum Tax in Hong Kong – Understanding the Rules for MNEs.

Compliance procedures for in-scope MNEs and constituent entities in Hong Kong 

Filing top-up tax returns 

No later than 15 months after the last date of the reporting fiscal year, Hong Kong-based constituent entities of in-scope MNEs are required to submit a single top-up tax return for the purposes of the GloBE rules and HKMTT. However, the filing deadline for the first transition year has been extended to 18 months from the end of the reporting year. 

For the first transition year of any constituent entities of an MNE group, the filing deadline has been extended to 18 months after the last day of the reporting fiscal year. In practice, groups should map their reporting fiscal year-end to the 15‑month (or 18‑month transition year) deadline and align local Hong Kong filings with the group’s overall GloBE reporting timetable.

The top-up tax return includes the information required in the standardized GloBE Information Return (GIR).   

Hong Kong constituent entities can be relieved from the obligation to file the GIR information if the required information has already been filed in another jurisdiction that will be able to exchange GIR information with Hong Kong under a qualifying competent authority agreement.  

Moreover, if an in-scope MNE has more than one constituent entity in Hong Kong, the entities can designate one entity to file the top-up tax return to the IRD. This entity must be appointed annually, and allows all other Hong Kong constituent entities of the group to be relieved of their filing obligation. 

An assessor may require a constituent entity to provide information on whether the information provided in the top-up tax return is accurate and complete. Failure to comply may trigger penalties under the Inland Revenue Ordinance. 

Filing of top-up tax notification 

In addition to the top-up tax return, each Hong Kong constituent entity of an in-scope MNE group is required to file an annual top-up tax notification in a prescribed form and manner within six months after the last day of the reporting fiscal year. The notification must detail its obligations for filing a top-up tax return and is intended to inform the IRD of that the MNE is in scope of the GloBE rules and HKMTT and that the constituent entities is within the jurisdiction of Hong Kong for the purpose of the top-up tax filing obligations.  

As with the top-up tax return, where there are multiple constituent entities of an in-scope MNE, they can appoint one entity to handle the filing procedures. 

The notification must include (but is not limited to) the following information: 

• The name, address, and business registration number of each of the MNE’s Hong Kong constituent entities;
• If the MNE’s ultimate parent company is located in a jurisdiction other than Hong Kong, the jurisdiction the in-scope MNE’s ultimate parent company is located and its name, address, and business registration number;
• Whether the GloBE filing is intended to be effected in Hong Kong for the fiscal year, and if so, the name, address, and business registration number of the entity designated to handle the filing in Hong Kong; and
• Whether the GloBE filing is intended to be effected outside of Hong Kong for the fiscal year, and if so, the jurisdiction in which the GloBE information return will be filed, and the name, address, and business registration number of the entity designated to handle the filing in that jurisdiction. 

Penalties for non-compliance 

A constituent entity that fails to file the top-up tax return or top-up tax notification is liable for a fine at level 3 under the Criminal Procedure Ordinance (up to HK$10,000/US$1,279) and a further fine that is three times the amount of undercharged top-up tax.

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Meanwhile, a constituent entity that fails to comply with an assessor’s request to provide additional information on a top-up tax return may be liable to a level 3 fine. 

If a constituent entity files, or knowingly allows to be filed on its behalf, a top-up tax return or notification that is misleading, false, or inaccurate, or provides misleading, false, or inaccurate information regarding an MNE’s top-up tax liability, may be liable for a level 3 fine and a further fine of three times the amount of undercharged top-up tax. 

Mandatory electronic filing 

The top-up tax returns and notifications must be filed electronically through the Pillar Two Portal by the designated constituent entity. This Pillar Two Portal is an extension of the Business Tax Portal and is accessed through the latter platform. 

These mandatory electronic filing procedures are being implemented in two phases: 

• Phase one: Launched on January 19, 2026, for designated entities to file the top-up tax notification.
• Phase two: To be launched in the fourth quarter of 2026 for designated entities to file the top-up tax return, as well as for the entities to view and download notices of top-up tax assessments. 

Entities tasked with filing these documents must register their designated business accounts under the Business Tax Portal to access the Pillar Two Portal directly. The individuals tasked with signing and submitting top-up tax notifications and returns on behalf of the entity must use their e-cert (Organisational) with AEOI Functions for the purposes of authentication. 

Mandatory e-filing of profits tax return 

In addition to the top-up tax return, certain applicable constituent entities of in-scope MNEs are also required to file their profits tax return for a year of assessment (YA) beginning on or after April 1, 2025.  

The mandatory e-filing applies to: 

• Profits Tax Return – Corporations (BIR 51); and
• Profits Tax Return – Persons Other Than Corporations (BIR 52). 

Constituent entities that are subject to the mandatory e-filing of profits tax returns are those that meet both of the following criteria: 

1. The entity is a Part 4AA entity of an MNE (see Part I) for a fiscal year beginning on or after January 1, 2025, corresponding to the applicable YA.
2. The MNE to which the Part 4AA entity is an in-scope MNE for a fiscal year beginning on or after January 1, 2025, corresponding to the applicable YA, or preceding the fiscal year corresponding to the applicable YA. 

A “fiscal year corresponding to the applicable YA” refers to the fiscal year of the MNE group within which the basis period of the YA of the entity ends (the YA beginning on or after April 1, 2025). 

The e-filing system adopts a “once-in, always-in” mechanism, meaning that if an entity is required to e-file a profits tax return under phase one for a given year of assessment (YA), it will be required to e-file this tax return for every subsequent YA. This applies regardless of whether the entity meets the two above conditions for any subsequent YA. It will generally also apply to entities subject to the phase one filing requirements that subsequently leave an in-scope MNE, as well as to those entities whose MNEs subsequently become out of scope. 

Exemptions

Entities may be subject to the phase one mandatory e-filing requirements, and may be permitted to file the profits tax return in paper form in the following circumstances: 

1. It is being wound up or amalgamated pursuant to the Companies (Winding Up and Miscellaneous Provisions) Ordinance or Companies Ordinance;
2. It has no record in the Business Register;
3. It has notified the Companies Registry or Business Registration Office of its date of cessation;
4. The accounting period of its financial statement that is to be submitted with the profits tax return exceeds 12 months;
5. The profits tax return for the YA 2025/26 is issued on or before March 31, 2026; or
6. For the purposes of refiling a profits tax return previously e-filed but found to be invalid. 

Any supplementary forms must still be filed electronically. 

Considerations for MNEs 

With Hong Kong’s Pillar Two compliance framework now operational, in-scope MNEs should ensure that internal processes, responsible entities, and electronic filing access are fully in place. This includes confirming which Hong Kong constituent entity will be designated for filings, aligning reporting timelines with group-level compliance obligations, and preparing for mandatory e-filing through the Pillar Two Portal and the Business Tax Portal.

Related Reading

Jennifer Lu, Partner at Dezan Shira & Associates, emphasizes that the primary Pillar Two risk for MNEs in Hong Kong lies less in technical interpretation and more in execution. Common challenges arise where group‑level GloBE calculations are not fully aligned with local Hong Kong filing requirements, where internal ownership of Pillar Two compliance is unclear across tax and finance teams, or where portal registration and access arrangements are addressed too late in the process. 

From an advisory perspective, we recommend that in‑scope MNEs approach Pillar Two compliance as an ongoing governance and operational exercise, rather than a one‑off filing obligation. As a practical next step, many groups benefit from conducting an early readiness review, covering scope confirmation, designation of Hong Kong filing entities, data availability, internal review and sign‑off processes, and access to the Pillar Two Portal. Taking these steps well ahead of the first notification and filing deadlines can materially reduce execution risk, avoid last‑minute remediation, and provide management with greater certainty over compliance outcomes.  

Tax planning and compliance in Hong Kong require careful navigation of evolving local and international tax rules. Our experienced advisors support businesses with corporate tax, indirect tax, individual tax, international tax, and transfer pricing, helping them remain compliant while optimizing their tax position in Hong Kong and the wider Asia?Pacific region.

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(Bloomberg) — Asian stocks advanced at the end of another volatile week fueled by the Middle-East conflict. Attention also started to turn Friday’s release of key US payrolls data.

MSCI’s benchmark Asia Pacific Index gained as much as 1% after the S&P 500 Index closed 0.1% higher, reversing an earlier loss of 1.5%. Sentiment toward equities improved after oil prices eased off their highs following a report that Iran is drafting a protocol with Oman to monitor traffic through the Strait of Hormuz, having effectively shut it down since the start of the war.

“The improvement in U.S. risk appetite has spilled over” into regional equities, said Hitoshi Asaoka, chief strategist at Asset Management One Co. in Tokyo. “While oil prices may not fully return to previous levels, if they do partially normalize, there is considerable room for a rebound from a liquidity perspective.”

A number of Asian markets were shut for holidays Friday including Australia, New Zealand, Hong Kong, Singapore, the Philippines and Indonesia. US stock markets will also be closed for a holiday, though the government is still scheduled to publish a slate of economic data, including March nonfarm payrolls.

South Korea led regional equity gains with the benchmark Kospi jumping as much as 3.5%, while Japan’s Nikkei 225 Stock Average rose 1.1%. China’s CSI 300 Index reversed an earlier advance to drop 0.4%.

Treasury futures were little changed in Asia with the cash market shut until US hours for a half day of trading.

US stocks had started off Thursday deep in the red after a speech from Trump late Wednesday did little to reassure investors that the war in the Middle East was nearing a swift resolution, though he has previously set a two-to-three-week timeline for ending the conflict. On Thursday, the president issued fresh threats on Iranian infrastructure in a bid to pressure Tehran in negotiations.

“With U.S. payrolls coming up and a holiday ahead, markets are wary of what could happen over the weekend — especially the first weekend after,” Trump’s speech said Rina Oshimo, a senior strategist at Okasan Securities Co. in Tokyo. “If attacks escalate or retaliations occur, oil prices could remain elevated for longer.”

Oil rallied above $110 a barrel Thursday after Trump vowed an escalation in the war in Iran over the coming weeks. West Texas Intermediate surged 11%, while the global Brent benchmark settled near $109. Europe’s diesel futures benchmark climbed above $200 a barrel for the first time since 2022.

War Pattern

The higher close for the S&P 500 on Thursday ran counter to a pattern of late-week selloffs that have hit the market ever since the war began, as nervous investors unwind positions that could be upended if weekend developments threaten to worsen the hit to the global economy.

“While assets gyrate on every new headline, until a clear agreement is achieved with a palatable plan for reopening the Strait, there’ll be downward pressure on economic growth and upward pressure on headline inflation,” said Max Gokhman, deputy CIO, Franklin Templeton Investment Solutions. “That spells indigestion for both equity and bond investors.”

Tesla Inc. shares fell after the company posted one of its worst sales quarters in years, missing Wall Street’s expectations, as it struggles to turn around its core business and navigate an increasingly challenged electric-vehicle market.

US labor-market data on Thursday gave mixed signals. A report from Challenger, Gray & Christmas Inc. showed a 25% increase in job-cut announcements in March from the previous month. Meanwhile, initial jobless claims unexpectedly fell in the week through March 28.

Corporate News:

A group of private credit firms led by Blackstone Inc. has refused to extend another lifeline to software company Medallia, amping up pressure on owner Thoma Bravo to inject more equity into the troubled business or hand over the keys via a debt restructuring. Stellantis NV is discussing options for building electric vehicles in Canada with its Chinese partner, Zhejiang Leapmotor Technology Co., according to people familiar with the matter. Alibaba Group Holding Ltd. has released its third proprietary AI model in as many days, reinforcing the company’s intent to focus on profiting off its flagship artificial intelligence services. Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.2% as of 11:31 a.m. Tokyo time Hang Seng futures rose 0.6% Nikkei 225 futures (OSE) rose 1.2% S&P/ASX 200 futures were little changed Japan’s Topix rose 0.6% The Shanghai Composite fell 0.5% Currencies

The Bloomberg Dollar Spot Index rose 0.3% The euro was little changed at $1.1533 The Japanese yen was little changed at 159.68 per dollar The offshore yuan was little changed at 6.8850 per dollar Cryptocurrencies

Bitcoin fell 0.8% to $66,392.95 Ether fell 1.1% to $2,044.91 This story was produced with the assistance of Bloomberg Automation.

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