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Hong Kong government announces measures to lure wealthy family offices.

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In an effort to boost Hong Kong’s status as a financial hub and attract more foreign investments, the government there has announced a number of measures aiming to lure wealthy family offices to the city after three years of strict Covid-19 regulations.

The new regulations put in place by the Hong Kong government are designed to make it simpler for family offices to open and run businesses in the city. The measures for family offices include a new Capital Investment Entrant Scheme (CIES), tax exemptions, art storage facilities and the establishment of a Hong Kong Academy for Wealth Legacy.

Capital investment entrant scheme

The latest CIES seeks to attract high-net-worth individuals to invest in Hong Kong by granting them residency if they choose to invest in the city’s asset markets, including equities, corporate and government debts, subordinated debts issued by authorised institutions and approved collective investment schemes.

Single family office tax regime

The HKSAR Legislative Council has approved the Single Family Office Concessionary Tax Regime Bill on 10 May 2023. The new regime will come into effect on 19 May and apply to tax assessments from 1 April 2022.

Investment profits from qualified assets, which include securities, bonds and funds, are eligible for profits tax exemption. Incidental income arising from holding qualified assets can also be exempted from profits tax but will be subject to a 5% threshold.

Other benefits of the Single Family Office Tax Regime include:

  • No separate application or pre-approval requirement
  • No local investment requirement
  • No local employees’ requirement
  • Obtaining a licence is not mandatory for Single Family Offices that only provides services to the family it serves.

There are two types of entities available for families, which are the Single Family Office (SFO) and a Family-owned Investment Holding Vehicle (FIHV) in order to qualify for the Hong Kong Single Family Office Tax Regime. As part of asset protection and estate planning options, families can hold these structures directly either through a trust or a personal investment business.

The key requirements for a FIHV are:

  • Controlled or managed in Hong Kong
  • Employ at least two qualified full-time employees and spend at least HKD 2 million on operating costs each year in Hong Kong.
  • The family owns at least 95% of the FIHV’s beneficial interest. It can be reduced to 75% if the remaining 25% is held by Section 88 tax-exempt charities.

Key requirements for the SFO are:

  • Controlled or managed in Hong Kong
  • Assets under management should be at least HKD 240 million
  • The family owns at least 95% of the SFO’s beneficial interest. It can be reduced to 75% if the remaining 25% is held by tax-exempt charities.
  • Services to the FIHV must account for at least 75% of its profits.

Hong Kong academy for wealth legacy

The Hong Kong Academy for Legacy and Wealth Planning, established by the Financial Services Development Council, aims to provide education, training and tools on legacy and wealth planning to the general public and professionals. The academy will be collaborating with industry professionals, regulators and academic institutions to offer a variety of programs and encourage wealth management and legacy planning in Hong Kong.

Philanthropy

The Hong Kong government is also working to make the city a centre for philanthropy, not only through assisting family businesses but also by streamlining the recognition of charity organisations’ eligibility for tax exemption status. The objective is to encourage philanthropists and family offices from around the world to invest their charitable funds in Hong Kong.

Art

As a part of the Airport City development, the Hong Kong Airport Authority is in the process of actively investigating the creation of storage, display and appreciation facilities for arts at the Hong Kong International Airport.

How Acclime can help

At Acclime, we provide SFO services to centralise the management of vast family fortunes. We select professional partners to manage investments, taxes, trusts and legal matters to transfer established wealth across generations effectively.

We offer a wide range of advisory services, including registration and attending to maintenance of SFO structures, relocation for family members if necessary, visa and other related services, assist family members to settle down in Hong Kong, the selection of private banks and asset managers, facilitating the opening of bank accounts and the acquisition of assets across the globe. We also maintain books and records for clients and undertake all regulatory tax filings where necessary.

Final thoughts

As more wealthy families look to pass on their assets to future generations, family offices are anticipated to become more significant in the global economy. Because of Hong Kong’s position as a major financial hub in Asia and its advantageous tax system, the city has become a destination for family offices and with the new measures that the government has announced, it is expected that more wealthy family offices will move to Hong Kong, which will boost foreign investment. Acclime provides professional family office services, and if you need any assistance, feel free to contact us.


About Acclime.

We are a premier provider of professional formation, accounting, tax, HR & advisory services in Hong Kong, focusing on providing high-quality outsourcing and consulting services to our international clients in Hong Kong and throughout the region.

Hong Kong government announces measures to lure wealthy family offices