HONG KONG SAR, CHINA Trends and Developments Contributed by: Wang Hui and Zheng Hui, King & Wood Mallesons
nesses in Hong Kong”, which outlines a comprehen - sive series of initiatives designed to promote this bur - geoning sector. Among the most noteworthy aspects are the tax incentives and the reintroduction of the Capital Investment Entrant Scheme (CIES). On 19 May 2023, the Inland Revenue (Amendment) (Tax Conces - sions for Family-owned Investment Holding Vehicles) Ordinance 2023 (the “Tax Concessions Ordinance”) came into effect. This legislation allows qualifying transactions and incidental transactions (up to 5%) of eligible family-owned investment holding vehicles (FIHVs) and family-owned special purpose entities (FSPEs) managed by single-family offices (SFOs) to be taxed at a significantly reduced profits tax rate of 0%. To qualify for this exemption, several conditions must be satisfied. • The SFO and its FIHVs must be ordinarily managed or controlled within Hong Kong. • At least 95% of the beneficial ownership of the SFO and its FIHVs must be held by members of the same family. However, a charitable entity may hold up to 25% of the beneficial interest (either directly or indirectly) in an FIHV or an eligible SFO, which means that the beneficial interest of the FIHV or eligible SFO must be at least 75%; additionally, the percentage of beneficial interest held by any unrelated person in the FIHV or eligible SFO, or the total percentage held by multiple unrelated per - sons, cannot exceed 5%. • The SFO is required to provide services to specific designated persons, which include family-related FIHVs, FSPEs in which the aforementioned FIHVs hold a beneficial interest (whether directly or indi - rectly), and family members. The fees charged for these services are subject to taxation, with a mini - mum of 75% of the taxable profits generated from services rendered to these specified persons. • The total value of the family’s designated assets managed by the SFO must be no less than HKD240 million. • The FIHV must be a legal entity (an entity refers to a body of persons (corporate or unincorporated) or a legal arrangement, and includes corporations, partnerships and trusts (including discretionary trusts)), regardless of whether it is established in Hong Kong or elsewhere, and must not be
engaged in general commercial or industrial busi - ness activities. • The SFO must employ a minimum of two quali - fied full-time employees in Hong Kong and incur operating expenses of no less than HKD2 million annually. In addition, an SFO may be exempt from licensing requirements if it meets the following criteria: • the SFO exclusively provides services to a group company that is wholly owned by the SFO, specifi - cally concerning the assets of that group; and • the activities of the SFO are incidental to the trus - tee services provided by a trust company that is registered under the Trustee Ordinance and that is fully owned by another company entirely owned by the trustee appointed by the family to establish the family trust. Regarding SFOs, if an SFO is established to fulfil the investment needs of another SFO and is not oper - ated as a business or with the intention of generating profit, it is generally not classified as a business and therefore does not require a licence. In both the 2024–25 and 2025–26 Budgets, the Financial Secretary announced additional initiatives for further enhancing Hong Kong’s preferential tax regimes for SFOs. These new policy initiatives, along with other regulatory developments, signal a broader transformation of Hong Kong’s wealth management landscape. Apart from the tax regime, two other nota - ble developments are: • the launch of a company re-domiciliation regime; and • the government’s continuing support for the virtual asset market. On 23 May 2025, the Companies (Amendment) (No 2) Ordinance came into effect, enabling non-Hong Kong companies to transfer their place of incorporation to Hong Kong. This provides an attractive option for entrepreneurs and family offices currently operating in other jurisdictions. By re-domiciling their holding entities to Hong Kong as FIHVs, these entities may
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