Family Office in Hong Kong
Family Office Development in Hong Kong
Hong Kong has long been recognized as an international financial center. In recent years, the Government has intensified its efforts to strengthen and diversify this position.
On 24 March 2023, the Government of the Hong Kong Special Administrative Region (HKSAR) issued the Policy Statement on Developing Family Office Businesses in Hong Kong, aimed at facilitating wealth protection and the transfer of family legacies across generations.
Investment Opportunities for Family Offices
Family offices established in Hong Kong can invest in a wide range of Hong Kong assets, including:
Securities, stocks, debentures, funds, and bonds
Notes, futures contracts, and foreign exchange (forex)
Deposits, exchange-traded commodities, and OTC derivative products
However, these family offices must not engage in other commercial or industrial activities.
Qualified transactions and incidental transactions (up to 5% of trading receipts) are exempt from tax.
Tax Benefits for Family-Owned Investment Holding Vehicles (FIHVs)
A zero tax rate applies to eligible Family-Owned Investment Holding Vehicles (FIHVs) that are managed by Single Family Offices (SFOs) in Hong Kong.
Special Purpose Entities (SPEs) set up to hold family assets also qualify for the same benefits.
An FIHV can be incorporated in or outside Hong Kong and may take the form of a corporation, partnership, or trust. It must be at least 95% beneficially owned by one or more family members.
Definition of “Family Members”
For the purpose of the regime, family members include a natural person (Person A) and the following related individuals (alive or deceased):
Person B – Spouse of Person A
Person C – Lineal ancestor of Person A
Person D – Lineal ancestor of Person B
Person E – Lineal descendant of Person A
Person F – Sibling of Person A, B, C, or D
Person G – Lineal descendant of Person F
Spouses of Person E, F, or G
If a marriage ends, the former spouse continues to be recognized as a family member for two tax years (current and subsequent year).
Adopted and stepchildren are also considered family members.
Structure and Operation of a Single Family Office (SFO)
An FIHV must be managed or controlled in Hong Kong by an eligible SFO, which must be a private company incorporated in or outside Hong Kong.
If incorporated outside Hong Kong, it may need to register as a non-Hong Kong company due to its local operations.
Note: Legal liabilities arising in Hong Kong cannot be separated from the head office.
If incorporated in Hong Kong, it must have:
At least 1 share (of any currency)
At least 1 director and 1 shareholder
A registered office and company secretary in Hong Kong
Directors are legally required to act in the best interest of the company and observe all statutory and fiduciary duties.
Both registered office and company secretary services can be arranged through licensed service providers registered under the Registry for Trust and Company Service Providers.
Operational Requirements
Minimum assets under management (AUM): HK$240 million
At least 2 qualified staff members managing the assets
Minimum annual operating expenses: HK$2 million
Overseas hires are permitted (subject to work visa approval)
Work visas are generally approvable for individuals with relevant experience and qualifications.
Election, Rulings, and Anti-Avoidance
Companies may elect to be SFOs, and such elections are irrevocable.
Advance rulings can be sought from the Inland Revenue Department (IRD) to confirm eligibility for tax exemption.
Anti-avoidance provisions are in place to prevent misuse of the incentive scheme.
These tax benefits serve as a strong incentive for families to establish investment offices in Hong Kong.
Several overseas family offices have already begun setting up operations in the city.
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This article was first published on the Professional Wealth & Family Office (PWFO) Blog
, where Belinda Wong is one of the Thought Leaders.