HONG KONG SAR, CHINA Law and Practice Contributed by: Alfred Ip, Hugill & Ip
fer of specific property, or a settlement of property. As such, testators must be advised to consider the possibility of a claim being brought against their estate by disinherited applicants and plan accordingly. For a detailed analysis of claims under Cap. 481, see Inher - itance Provision for Family and Dependants and the Hugill & Ip commentary on A Key Judgment on Interim Maintenance for a Child Under Cap. 481. 2.4 Marital Property Hong Kong operates a separate property regime dur - ing marriage, as codified in the Married Persons Status Ordinance (Cap. 182). Each spouse retains independ - ent legal ownership and control of the assets they acquire before and during the marriage and may deal with their own property without the other spouse’s consent. There is no concept of communally owned property or automatic joint ownership of matrimonial assets during a marriage. Upon divorce, the court exercises broad discretion - ary powers under the Matrimonial Proceedings and Property Ordinance (Cap. 192) to redistribute assets between the parties. The starting point is an equal divi - sion of the matrimonial pot, which is broadly defined as the assets acquired during the marriage through the joint efforts of the parties, although the court may depart from equality to reflect the needs of the par - ties, the presence of pre-marital assets, or other rel - evant factors. Assets held in trust are not automati - cally excluded from consideration. In fact, the court may treat trust assets as a financial resource available to a party, particularly where they have maintained a degree of control over the trust. Prenuptial and postnuptial agreements are not expressly regulated by Hong Kong statute. However, following the landmark Court of Final Appeal deci - sion in SPH v SA [2014] 3 HKLRD 497, the courts will accord them significant, often decisive, weight, provided that the agreement was freely entered into by both parties with a full appreciation of its implica - tions, and that it would not be unfair to hold the par - ties to it. The prerequisites for enforceability include independent legal advice for each party, full and frank financial disclosure, and adequate time for reflection before signing. For comprehensive guidance on nup -
tial agreements, see Prenuptial Agreements and Pro - tecting Your Wealth in Marriage. 2.5 Transfer of Property The transfer of property in Hong Kong, whether by life - time gift or on death, does not give rise to any capital gains tax liability, as Hong Kong does not levy such a tax. There is accordingly no concept of a “step-up” in cost basis upon death, nor any deemed disposal at market value on a gift. This simplicity is a signifi - cant advantage for estate planning, as assets can be transferred between generations without triggering an immediate tax charge on embedded gains. For assets that may be subject to Profits Tax if dis - posed of in a trading context ‒ for example, properties held by a company that is deemed to be trading in properties ‒ the transfer mechanism and the consid - eration paid will be relevant to the Profits Tax compu - tation. However, for typical private wealth assets held for long-term investment purposes, the absence of capital gains tax means that the cost basis of assets is generally not a primary planning consideration within the Hong Kong domestic tax framework. Stamp duty remains the principal transaction cost on the transfer of Hong Kong real estate and Hong Kong stock. The transfer of assets located outside Hong Kong ‒ such as foreign securities, overseas real estate, or interests in foreign companies ‒ does not attract Hong Kong stamp duty, though it may trigger tax liabilities in the jurisdiction where the assets are located. 2.6 Transfer of Assets: Vehicle and Planning Mechanisms Given the absence of gift and inheritance taxes in Hong Kong, the direct transfer of assets to younger generations is inherently tax-efficient from a domestic perspective. In terms of wealth planning, the primary objectives are therefore asset protection, governance, and the management of family dynamics, rather than tactical tax minimisation per se. The discretionary trust remains the premier vehicle for intergenerational wealth transfer in Hong Kong. By vesting legal ownership of assets in an independent trustee, the settlor removes those assets from their
263 CHAMBERS.COM
Powered by FlippingBook