HONG KONG SAR, CHINA Trends and Developments Contributed by: Hui Wang and Hui Zheng, King & Wood
operating expenditure of not less than HKD2 mil - lion. At present, qualifying investments are largely confined to conventional financial asset classes such as shares, bonds, funds and foreign exchange. The 2026 enhancement: expanding the scope of qualifying investments On 25 February 2026, the Financial Secretary announced in the 2026-27 Budget that the govern - ment would legislate within the year to further opti - mise the tax concession regime for family offices and funds. On 2 March 2026, the Secretary for Financial Services and the Treasury explained the proposed measures in further detail at the Legislative Council Panel on Financial Affairs. On 12 June 2026, the gov - ernment gazetted the Inland Revenue (Amendment) (Preferential Tax Regimes for Funds, Family-owned Investment Holding Vehicles and Carried Interest) Bill 2026, which is scheduled to be introduced into the Legislative Council for its first reading on 24 June 2026. New qualifying asset classes Based on the government’s announced proposals, the following asset classes are expected to be added to the list of qualifying investments: • digital assets, including cryptocurrencies and tokenised assets; • precious metals and specified commodities; • carbon emission derivatives, carbon emission allowances and carbon credits; • insurance-linked securities; • equity interests in non-corporate entities; • loans, including private credit investments; and • real property situated outside Hong Kong. Structural refinements Alongside the broader asset scope, the proposed measures would make a number of structural refine - ments. These include expanding the definition of “fund” to cover certain funds-of-one, removing the existing 5% threshold for incidental transactions, relaxing the tax concession treatment for special pur - pose entities, refining the anti-round-tripping provi - sions, and enhancing the carried interest tax conces -
sion arrangements. The amending bill is expected to be introduced into the Legislative Council by mid- 2026, with the proposed changes, if enacted, taking retrospective effect from the 2025/26 year of assess - ment. Practical significance for family office structuring The proposed reforms have significant practical impli - cations for families establishing or operating family offices in Hong Kong and for their professional advis - ers. The formal inclusion of digital assets would address a material gap in the existing regime. Qualifying income derived by a FIHV from holding digital assets would be expected to fall within the profits tax concession, aligning the tax framework with the Securities and Futures Commission’s (SFC) ongoing development of the virtual asset regulatory regime. The express cover - age of physical and alternative assets, including pre - cious metals, commodities and carbon credits, also reflects the global tendency of high net worth families to diversify beyond conventional financial assets. This would allow broader portfolios to be built through a Hong Kong platform without additional tax friction. The proposed extension of the “fund” definition to cer - tain funds-of-one is equally important from a struc - turing perspective. Private investment arrangements of high net worth families, including certain fund structures held through family trusts, may for the first time be able to come within the fund tax concession regime. This may simplify structuring analysis and reduce duplicative compliance costs for certain fam - ily office arrangements. The relevant amendments remain subject to the legislative process, and the precise eligibility condi - tions and anti-avoidance provisions will depend on the enacted legislation. Family offices and their legal advisers should therefore monitor Legislative Council developments and assess existing structures against the new rules as they are finalised. The New Capital Investment Entrant Scheme: Continued Optimisation Since its relaunch in March 2024, the New CIES has become an important route through which high
277 CHAMBERS.COM
Powered by FlippingBook