Other BriefingsSetting Up a Family Office in Hong Kong
Hong Kong’s strategic location, robust financial infrastructure, favorable tax regime, and high quality of life make it an ideal destination for establishing family offices, offering comprehensive support for wealth management and long-term family planning.
Hong Kong’s family office sector has seen remarkable growth, with a recent market study revealing that over 2,700 single-family offices were reportedly operating in the city as of December 31, 2023. This significant number highlights Hong Kong’s position as a global hub for family offices, complementing its long-standing reputation as an international center for asset and wealth management.
Historically, Hong Kong’s role in managing family wealth dates back to the late 1800s, and it has evolved into one of Asia’s largest cross-border wealth management centers. The recent surge in family offices can be attributed to the city’s strategic initiatives, including the development of a world-class family office regime. The Hong Kong government’s ongoing efforts to attract more family offices have led to new policies and incentives, reinforcing the city’s status as a premier destination for global family offices.
Hong Kong is a premier location for establishing a family office due to its strategic access to Asia’s markets, favorable tax regime, and robust financial services, complemented by a high quality of life.
In this article, we explore the key factors that shape Hong Kong’s family office sector and a outline the steps to establish a family office in Hong Kong.
What is a family office?
A family office is a specialized entity designed to manage the wealth and needs of high-net-worth individuals and families. By consolidating investments and financial management under one roof, a family office provides greater control, transparency, and efficiency. This is particularly crucial as we approach a significant intergenerational wealth transfer, with an estimated US$8 trillion expected to change hands by 2029, according to Credit Suisse.
Family offices vary in structure, typically tailored to the specific needs of the family. Commonly, they involve a holding company or investment vehicles within a trust, centralizing financial operations and bringing dedicated expertise in-house. This setup also offers younger generations a platform to gain experience in investment management and business operations, preparing them to manage family wealth in the future.
Beyond financial management, family offices often cover estate planning, philanthropy, and concierge services, ensuring comprehensive management of the family’s wealth and lifestyle.
Why choose Hong Kong to set up a family office?
Hong Kong is an attractive destination for establishing a family office, offering strategic access to Asia’s dynamic markets, especially Mainland China and the broader Asia-Pacific region. As a global wealth hub, Hong Kong ranks among the top financial centers, second only to Switzerland in assets under management. Its deep capital markets, well-established banking and legal systems, and extensive network of skilled professionals provide family offices with a strong foundation for wealth management and growth.
The city’s favorable tax regime is a major draw, featuring no sales tax, VAT, or capital gains tax, and no withholding tax on dividends or interest. Recent tax concessions specifically for family offices further enhance Hong Kong’s appeal, especially in comparison to hubs like Singapore, Switzerland, and London. In addition to its robust financial services, Hong Kong offers a business-friendly environment with streamlined regulations, easy access to financing, and government incentives aimed at attracting more family offices, with a goal of reaching 600 more by 2025.
Moreover, Hong Kong provides a high quality of life, with world-class education, healthcare, and a safe, vibrant lifestyle, making it an ideal location for families to both manage their wealth and enjoy a well-rounded living experience.
Key market trends
The family office sector in Hong Kong is shaped by several emerging trends. One notable trend is the increasing interest from ultra-high-net-worth (UHNW) individuals and families in establishing family offices in the city, driven by Hong Kong’s competitive tax regime and new initiatives like the Capital Investment Entrant Scheme (CIES). This scheme, along with tax concessions for Family-owned Investment Holding Vehicles (FIHVs), has spurred a surge in inquiries and interest from potential family office founders.
Global economic factors also play a crucial role in influencing the local family office market. Hong Kong’s deep capital markets, global connectivity, and proximity to Mainland China make it an attractive location for family offices, especially as digital technology continues to break down geographical barriers. The city’s flexibility, innovation in capital markets, and its strategic position in Asia further contribute to its appeal as a preferred location for family offices.
Supportive policies for family offices in Hong Kong
Hong Kong has long been a preferred location for both homegrown and foreign family offices, particularly those seeking access to Mainland China, due to its stable legal framework, favorable tax environment, and benign territorial tax system. Historically, capital gains and foreign-sourced dividends were not taxed under this system, and the overall tax rates remained relatively low. Additionally, the city’s low personal income tax rates have made it an attractive destination for expatriate professionals. However, there has been some ambiguity in the past regarding what constitutes a taxable capital gain versus a non-taxable trade profit.
In response to the growing success of similar tax exemption schemes in Singapore, Hong Kong recognized the need to provide greater tax certainty for single family offices (SFOs). To address this, the Hong Kong government introduced the Inland Revenue (Amendment) (Tax Concessions for Family-owned Investment Holding Vehicles) Bill 2022. This legislation, which became effective on May 19, 2023, offers significant tax exemptions for qualifying income derived from Family-owned Investment Holding Vehicles (FIHVs), thereby providing clarity and certainty for existing SFOs as well as families considering establishing one in Hong Kong.
Under the new law, gains from the trading of most bankable assets, known as “qualifying transactions,” are exempt from Hong Kong Profits Tax, provided certain conditions are met. These conditions include:
- The SFO must exclusively serve one family.
- Both the SFO and the FIHV must be at least 95 percent beneficially owned by the family, although this threshold can be reduced to 75 percent if the remaining 25 percent is held by a tax-exempt charity under Hong Kong’s Inland Revenue Ordinance Section 88.
- The SFO and the FIHV(s) must be managed and controlled in Hong Kong, although the vehicles themselves do not need to be incorporated in the city.
- The assets under management must exceed HKD 240 million.
- For each FIHV, the family office must employ at least two qualifying investment professionals (who can be family members) and maintain a minimum annual operating expenditure of HK$ 2 million (US$ 256,510.60).
Notably, because SFOs typically do not provide investment advice or asset management services to third parties, they are not required to obtain regulatory approval from the Securities & Futures Commission of Hong Kong (SFC). Moreover, there is no special application or registration process required to benefit from the FIHV tax exemption.
These measures are part of a broader strategy by the Hong Kong government to attract more family offices and strengthen the city’s status as a leading asset management hub in Asia. To further this goal, FamilyOfficeHK, a branch of the Financial Services and the Treasury Bureau, has established a team of specialists in various international locations. These experts are dedicated to assisting UHNW families in setting up their family offices in Hong Kong, ensuring the city continues to thrive as a premier destination for global wealth management.
How to set up a family office in Hong Kong
Setting up a family office in Hong Kong involves a structured approach to ensure effective management of wealth and long-term preservation across generations. Below are the key formal steps and considerations:
| Key steps to set up a family office in Hong Kong | |
| Steps | Details |
| Determining the type of family office | A decision is made between establishing a Single Family Office (SFO), which serves one family, or a Multi-Family Office (MFO), which caters to multiple families. An SFO offers more personalized and exclusive services, while MFOs provide shared resources among several families. |
| Choosing the appropriate legal structure | An appropriate legal structure is selected for the family office, such as a limited company, partnership, or trust. A limited company is the most common choice due to its flexibility and limited liability protection. |
| Preparing and submitting necessary documents | To register a family office in Hong Kong, you will need the following documents:
These documents are submitted to the Hong Kong Companies Registry, either physically or through the electronic service platform. The registration process typically takes 1-2 business days. |
| Opening a bank account | Once the company registration is complete, the next step involves opening a bank account for the family office. This process typically takes 2-4 weeks, depending on the bank’s due diligence procedures. |
| Tax registration | The family office is registered for business and profits tax with the Hong Kong Inland Revenue Department. This step ensures compliance with Hong Kong tax laws and enables access to the favorable tax regime designed for family offices. |
| Hiring full time employees | To benefit from tax incentives, the family office must hire at least two full-time employees and incur annual operating expenses of at least HKD 2 million. These employees typically include investment managers, legal advisors, and financial experts, ensuring the professional management of family assets. |
| Establishing a family charter | A family charter is established to outline the family’s long-term goals, values, and governance structure. This document serves as the strategic foundation for decision-making and ensures that the office operates in alignment with the family’s objectives for wealth management and legacy building. |
| Developing an asset management strategy | The types of assets to be managed by the office are defined, which may include real estate, financial instruments, or art collections. Structuring assets for tax efficiency, typically through private trusts, can optimize wealth growth and preservation. |
In addition to the essential steps outlined for establishing a family office in Hong Kong, ongoing compliance with local regulations and tax obligations is critical for sustained operations. It is advisable to regularly review the family office’s investment strategies and governance structures to ensure they adapt to evolving market conditions and the family’s changing needs. Engaging with a network of local experts, including legal and financial advisors, can help navigate the complexities of Hong Kong’s regulatory environment, ensuring optimal tax efficiency and compliance.
About Us
China Briefing is one of five regional Asia Briefing publications, supported by Dezan Shira & Associates. For a complimentary subscription to China Briefing’s content products, please click here.
Dezan Shira & Associates assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Haikou, Zhongshan, Shenzhen, and Hong Kong. We also have offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, and Dubai (UAE) and partner firms assisting foreign investors in The Philippines, Malaysia, Thailand, Bangladesh, and Australia. For assistance in China, please contact the firm at china@dezshira.com or visit our website at www.dezshira.com.
- Previous Article China-Kazakhstan: Bilateral Trade and Investment Profile
- Next Article
