HONG KONG SAR, CHINA Law and Practice Contributed by: Jeffrey Lee, Jessica Leung and Hilary Leung, Charles Russell Speechlys
the Court of Final Appeal held that the principles laid down in a 2011 UK Supreme Court decision represent the position of the law on nuptial agreements in Hong Kong. In summary, marital agreements entered into by the parties with a full appreciation of its implica - tion should be given effect unless it would be unfair to hold the parties to their agreement in the prevailing circumstances. In deciding whether the division of matrimonial assets should depart from equal division, Hong Kong courts will treat the nuptial agreement as part of all the cir - cumstances of the case under Section 7 (1) of the Matrimonial Proceedings and Property Ordinance, but the weight to be attached to it in each case is subject to the courts’ discretion. In applying the 2011 UK Supreme Court decision, the Hong Kong court agreed in a 2019 case that, where an unvitiated nuptial agreement exists, the overriding consideration of the court is fairness. An unvitiated nuptial agreement is one of the circumstances to be considered in arriving at a fair distribution of assets. The court will have to assess its weight; in that assess - ment, needs and compensation would be important, while sharing less so. The court further proposed to approach the issue of needs with reasonableness as the guide. 2.5 Transfer of Property As there is no capital gains tax in Hong Kong, there is no cost base adjustment on a transfer of property. However, gains on the disposal of assets may be sub - ject to profits tax if such transaction amounts to trade, which is a question of fact (see 1.1 Tax Regimes ). 2.6 Transfer of Assets: Vehicle and Planning Mechanisms As there is no capital gains tax or inheritance tax in Hong Kong, there has historically been little incentive to establish vehicles or planning mechanisms solely for the purpose of transferring assets to younger gen - erations in Hong Kong tax-free. This has now changed as Hong Kong families become more and more inter - national and therefore more exposed to high-tax jurisdictions. As a result, there are more incentives for succession planning from a tax perspective. However,
discretionary trusts are still commonly used for the purpose of family and succession planning. 2.7 Transfer of Assets: Digital Assets The Securities and Futures Commission and the Hong Kong Monetary Authority introduced a circular in 2022 imposing a number of restrictions on the sale of quali - fying virtual asset-related products. The Securities and Futures Commission also published a regulatory roadmap in 2025 to highlight their determination to reshape the current virtual asset compliance regime. In 2023, the Hong Kong court ruled that cryptocurren - cies satisfy the definition of “property” and are con - sidered proprietary assets, and their ownership can be traced even if they have been mixed with other assets. In the matrimonial context, the ruling implies that digital assets can potentially be traced, and the issue of whether they form part of the matrimonial assets may be put forward for determination. 3. Trusts, Foundations and Similar Entities 3.1 Types of Trusts, Foundations or Similar Entities Discretionary trusts are commonly used for succes - sion and estate planning purposes. There is no private foundation under Hong Kong law. Major changes were made to the Trustee Ordinance in 2013, including: • imposing a statutory duty of care on trustees in relation to certain powers and functions; • introducing a regime of control over professional trustees’ exemption clauses; • providing a default charging provision for profes - sional trustees; and • statutory protection of Hong Kong trusts against foreign forced heirship rules. The Perpetuities and Accumulations Ordinance was amended at the same time. The rule against perpetui - ties was abolished, and a trust may now continue in existence for an unlimited period unless the terms of the trust provide to the contrary.
231 CHAMBERS.COM
Powered by FlippingBook