Family Office in Hong Kong
Hong Kong has long been an international financial center. In recent years, efforts have been made to buttress this position. On 24 March 2023, the Government issued the Policy Statement on Developing Family Office Businesses in Hong Kong. This could facilitate the protection of wealth and passing on of the legacy to future generations within a family.
These family offices can invest in HK assets such as securities, stocks, debentures, funds, bonds notes, futures contracts, forex, deposits, exchange-traded commodities, OTC derivative products etc. They must not carry out other commercial or industrial activities. Qualified transactions and incidental transactions (subject to the threshold of 5% trading receipts) are exempt from tax.
Zero tax is available for eligible family-owned investment holding vehicles (FIHV) which are managed by single family offices (SFO) in Hong Kong (HK). Special purpose entities are also eligible if they are set up to hold the assets of the family offices. FIHV can be an entity created or set up in or outside of Hong Kong. This could be a corporation, partnership or trust. It must be at least 95% beneficially owned by one or more members of the family. Members of the family include a natural person (Person A) and all of the persons related to Person A (whether alive or deceased) mentioned below:
- a spouse of Person A (Person B);
- a lineal ancestor of Person A (Person C);
- a lineal ancestor of Person B (Person D);
- a lineal descendant of Person A (Person E);
- a sibling of Person A, Person B, Person C or Person D (Person F);
- a lineal descendant of Person F (Person G); and
- a spouse of Person E, Person F and Person G.
If a person ceases to be a spouse, the spouse connection will still be regarded for the current and subsequent year i.e., a total of two years for tax assessment. Adopted and step children are also counted in the family relationship.
FIHV must be managed or controlled in HK by an eligible SFO which must be a private company incorporated in or outside of HK. If the SFO is incorporated outside of HK, consideration must be made whether the company should be registered as a non-Hong Kong company because of its local operation. Legal liability incurred in HK could not be separated from its head office. For a private company incorporated in HK, initial share capital (1 share of any currency), at least 1 director and 1 shareholder, registered office and company secretary in HK are required. Director(s) must act in the best interest of the company and also observe all the statutory and fiduciary duties. Registered office address and company secretary can be arranged with a service provider licensed by the Registry for Trust and Company Service Providers.
Assets managed by the SFO must be at least HK$240 million. There must be at least 2 qualified staff managing the assets. Annual operating expenses must not be less the HK$2 million. It is not specified that the 2 staff must be recruited in HK. For overseas recruits, work visa must be applied for. With proper qualifications and experiences, visa application should not be difficult.
Companies can elect to be SFOs. Election once made is irrevocable. Advance rulings can be sought from the Inland Revenue Department to confirm if the transactions can be tax exempt. At the same time, anti-avoidance measures are in place to minimize abuses. The tax benefits could serve as an incentive for families to establish investment offices in HK. Some overseas family offices have started establishing themselves here.
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Belinda will guide you on how to enter Hong-Kong, China. She will be delighted to give a 30 minutes free Q&A interview to deal with any specific question you may have.
Send an email to [email protected] to book an appointment.
