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Hong Kong’s new tax regime makes it a natural home for family offices

28 June 2022

Alice Lau

Executive Director, Head of Private Wealth of Asia Pacific

Alice Lau

Executive Director, Head of Private Wealth of Asia Pacific

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Hong Kong’s proposed profits tax exemption for single family offices is expected to enhance its reputation as a wealth management centre, aligning it with Singapore

The Hong Kong government is proposing a profits tax exemption for single family offices (SFOs) in the administrative region.

The new tax regime has been through consultation, so its adoption is now a formality. The new legislation will most likely be passed within this financial year.

The new regime will exempt family-owned investment holding vehicles (FIHVs) managed by SFOs in Hong Kong from profits tax on a range of qualifying transactions.

In effect, it will give SFOs the same tax status as funds. Though not specified in the consultation document, it’s likely to cover the typical assets in which ultra-high-net-worth individuals (UHNWI) and their families invest.

Making Hong Kong family offices more attractive

Hong Kong is already well regarded as an international financial services centre. The new legislation clearly aims to make it more competitive as an asset management hub – helping Hong Kong to expand its wealth management industry by encouraging more wealthy families to invest.

The growth of family offices is a global phenomenon and Asia has recently outpaced the rest of the world in their creation. About 40% of family offices in Asia-Pacific have been established since 2010.

China now has the second highest number of billionaires in the world, behind only the US, with numbers rising fast. This growing wealth is driving demand for the kind of asset protection and succession planning that can be provided within an SFO.

Hong Kong’s advantages as a centre for SFOs don’t end with its proximity to China. It‘s an established centre for global financial services with an excellent provider base. Nearly 7% of the working population is employed in financial services.

It has a long history of providing wide-ranging products and services to local and international businesses. It also has mature infrastructure and capital markets to match.

To take just one example, 78 of the world’s top 100 banks have a significant presence in Hong Kong.

Why choose a Hong Kong family office

Hong Kong is already home to a significant number of SFOs, thanks to its reputation as a centre for private wealth management; stable and flexible capital market; and deep talent pool.

But its tax regime was holding the sector back. Singapore introduced similar tax exemption legislation for SFOs some years ago, with great success.

UHNWIs in China especially have been seeking similar tax certainty closer to home.

The new tax regime will level the playing field, creating near parity between Singapore and Hong Kong in terms of costs, tax, employment and administrative obligations.

It makes Hong Kong one of the most attractive destinations for SFOs in the world.

As an international financial centre, Hong Kong provides a strong foundation for family offices. The new tax regime means many more UHNWIs will view it as the natural home for their family assets.

How Intertrust Group can help with Hong Kong family offices and family trusts

Intertrust Group can help clients set up and maintain family offices in Hong Kong, as well as establishing and maintaining family trusts in clients’ preferred trust jurisdictions.

Intertrust Group recently won the WealthBriefing Asia Award for Independent Trust or Fiduciary Company (Greater China). Get in touch to learn how our private wealth team can support you.

  • Our experts have many years’ experience setting up and managing SFOs and family trusts. Intertrust Group provides a wide range of services, including accounting, payroll and bookkeeping services for SFOs in Hong Kong. We also offer trustee administration services for family trusts in various offshore jurisdictions.
  • Intertrust Group provides a truly personalised, stable and high-quality private wealth service to help clients structure and protect their assets.
  • Intertrust Group is a publicly listed company with 70 years’ experience providing world-class wealth management services to clients around the world.