Just days after putting its 2003 Capital Investment Entrance Scheme back into public discussion, the Hong Kong government has announced yet another piece of legislation to incentivise Family Offices to join them.
The Inland Revenue Tax concessions for family-owned investment holding vehicles Bill 2022 will exempt family-owned investment holding vehicles (FIHVs) from tax on transactions carried out by a Hong Kong-based Family Office with retrospective effect from 1st April 2022.
The exemption includes profits earned related to the qualifying transactions, subject to a 5 per cent threshold. A minimum asset value of HKD240 million also applies and one or more family members must hold at least 95 per cent of the direct and indirect beneficial interest in the Family Office during the whole of the tax year. It need not be incorporated in Hong Kong, but its central management and control must be exercised there at all times.
Wilson Cheng of Ernst & Young Hong Kong released a statement on the changes which read: “Similar to the existing unified fund exemption regime, an FIHV will be taxed at a 0% concessionary tax rate under the proposed tax concession regime in respect of its assessable profits earned from qualifying transactions carried out or arranged by an SFO in Hong Kong. This includes profits earned incidental to the qualifying transactions, subject to a 5% threshold. The tax concessions will also be provided to eligible SPEs2 owned by an FIHV in proportion to its beneficial interest in such SPEs.
“The proposed tax concession regime will take retrospective effect from 1 April 2022. An FIHV can elect for the tax concessions by making an irrevocable election in writing.”
With the Hong Kong government targeting 200 Family Offices to be in motion by the end of 2025, we certainly anticipate the announcement of further regulations aimed at attracting wealthy families to Hong Kong’s shorelines. Do you think they will work?