Hong Kong Broadens Tax Relief for Funds and Family Offices
Hong Kong has introduced legislation to expand its preferential tax regimes for privately offered funds, family-owned investment holding vehicles and carried interest.
The reform would bring private credit, digital assets, overseas property, precious metals, carbon-related instruments and other alternative investments within a broader tax concession framework.
It would also relax parts of the special-purpose entity and incidental transaction rules. At the same time, funds using the unified exemption would face new reporting and economic substance requirements.
The Government gazetted the Inland Revenue (Amendment) (Preferential Tax Regimes for Funds, Family-owned Investment Holding Vehicles and Carried Interest) Bill 2026 on 12 June 2026. The Bill received its first reading in the Legislative Council on 24 June 2026 and remains under committee scrutiny.
The proposals are relevant to fund sponsors, private credit managers, digital-asset investors and international families considering Hong Kong investment structures.
For readers’ convenience, we have placed the key official sources and regulatory materials at the end of this article.
Publish Date
20 July 2026
Reading Time
15 minutes
Category
Legal News
Jurisdiction
Hong Kong
The Bill remains under review
The legislation has not yet been enacted.
A Legislative Council Bills Committee has begun examining the proposals, including at a meeting held on 8 July 2026. The final provisions may change before the Bill completes the legislative process.
Businesses should therefore distinguish between the Government’s policy proposal and the final tax treatment that will apply after enactment.
Proposed effect from 2025/26
The Government intends the relevant amendments to apply from the 2025/26 year of assessment.
The Inland Revenue Department currently permits taxpayers who appear eligible under the proposed rules to submit their 2025/26 returns on that basis. This is an administrative transition measure rather than confirmation that the Bill has already become law.
IRD also warns that taxpayers may need to revise returns if the enacted provisions differ from the current Bill.
This treatment is better described as proposed application from 2025/26 with transitional filing support, rather than a completed retrospective tax exemption.
The current fund regime
Hong Kong already provides a unified profits tax exemption for qualifying privately offered funds.
The regime is not limited to private equity. It can cover qualifying transactions in securities, private-company interests, futures, foreign exchange contracts, deposits, exchange-traded commodities, foreign currencies and over-the-counter derivatives.
The Bill would expand the regime to reflect a wider range of modern investment strategies.
Family investment vehicles
Hong Kong introduced a separate concession for eligible family-owned investment holding vehicles, or FIHVs, in 2023.
The regime can apply a 0% profits tax rate to qualifying profits earned by an eligible FIHV or family-owned special-purpose entity. The concession applies only where the ownership, management, asset, substance and transaction requirements are met.
An FIHV must generally be normally managed or controlled in Hong Kong and managed by an eligible single family office.
Current FIHV conditions
The principal existing requirements include:
| Requirement | Current position |
|---|---|
| Minimum specified assets | HK$240 million |
| Family ownership | Generally at least 95% |
| Hong Kong employees | At least two qualified full-time employees |
| Hong Kong expenditure | At least HK$2 million |
| Local management | Eligible single family office in Hong Kong |
| Rate on qualifying profits | 0% |
The HK$240 million threshold may be met by one FIHV or by aggregating specified assets across relevant FIHVs managed by the same eligible single family office.
The Bill broadens investment eligibility but does not remove the need for genuine Hong Kong management and substance.
The fund definition would widen
The Bill proposes to expand the statutory meaning of a fund.
One stated policy objective is to cover specified funds-of-one. This is important for structures established for a single institutional investor, family or strategic capital provider that may not fit a conventional pooled-fund model.
Funds-of-one gain a clearer route
Traditional fund definitions often assume that capital is pooled from several investors.
A fund-of-one may instead be established for one pension fund, sovereign investor, insurance group or family. The proposed reform could allow more of these structures to access the unified exemption where the statutory conditions are satisfied.
The change should not be treated as an automatic exemption for every single-investor vehicle.
The structure must still meet the final definition of a fund, conduct qualifying transactions and comply with the new reporting and substance rules.
Fund and FIHV routes differ
A fund-of-one is not automatically a family-owned investment holding vehicle.
A family considering Hong Kong may need to compare:
- the unified fund exemption;
- the FIHV concession;
- an ordinary Hong Kong investment company;
- a limited partnership fund;
- a trust structure; and
- an offshore vehicle managed from Hong Kong.
The correct route will depend on ownership, investor participation, management functions and the underlying assets.
More assets would qualify
The Bill’s main commercial effect is the expansion of qualifying investments.
The Government has expressly linked the reform to private credit, digital assets, precious metals and commodity activity.
Private credit and loans
Loans and private credit investments would receive clearer access to the concessionary framework.
This is relevant to:
- direct lending funds;
- venture debt;
- real estate credit;
- infrastructure lending;
- distressed debt;
- trade finance; and
- family office lending portfolios.
Hong Kong is seeking to attract more private credit activity as part of its wider asset and wealth management strategy.
The tax treatment will not remove other legal requirements. A structure may still need to consider money-lending rules, securities regulation, fund management licensing and the source of interest income.
Digital assets
Digital assets would be added to the qualifying investment perimeter.
This could make the exemption more relevant to virtual asset funds, token investment vehicles and family offices holding diversified crypto portfolios.
Tax eligibility does not replace regulatory approval.
A manager, adviser, trading platform, custodian or distributor may still require licensing under Hong Kong’s virtual asset and securities framework. Token classification, custody arrangements and marketing activity must be reviewed separately.
Overseas real estate
The proposals include immovable property situated outside Hong Kong.
This could support structures holding foreign commercial, residential, logistics, hospitality or development assets.
International families may find the change particularly useful where a Hong Kong FIHV sits above regional property holding companies.
The proposal should not be read as a general exemption for Hong Kong real estate. Domestic property remains subject to separate statutory restrictions and anti-avoidance rules.
Precious metals and commodities
Precious metals and specified commodities form part of the proposed expansion.
The change supports the Government’s policy of developing Hong Kong as a centre for precious metal and commodity trading.
Potentially relevant assets include physical precious metals, qualifying commodity interests and related investment instruments.
The final treatment will depend on the enacted asset definitions and whether the structure is investing or carrying on an active trading business.
Carbon market assets
The reform also addresses carbon-related investments, including emission allowances, carbon credits and related derivatives.
These assets are increasingly used by investment funds, industrial groups and family offices seeking exposure to environmental markets.
The concession will not determine whether a carbon instrument is legally valid, verifiable or suitable for a particular portfolio. Due diligence on the registry, methodology, ownership and transfer rules remains necessary.
Insurance-linked securities
Insurance-linked securities are also expected to enter the wider qualifying asset list.
This may benefit specialist funds investing in catastrophe bonds and other instruments linked to insurance risk.
The change complements Hong Kong’s broader effort to develop insurance and risk-transfer markets.
Private-company interests
Investments in private companies are not entirely new to the regime.
The existing FIHV rules already include shares, debentures, loan stocks, funds, bonds and notes issued by private companies.
The more significant reform concerns the treatment of investments held through private companies and special-purpose entities. Existing property, holding-period, control and anti-avoidance tests may still apply.
Incidental income rules would ease
The current FIHV regime allows profits from transactions incidental to qualifying transactions to benefit from the concession, subject to a 5% receipts threshold.
The Bill proposes to remove that threshold.
Fewer cliff-edge results
The present rule can create a sharp tax result where incidental receipts exceed 5% of total receipts from qualifying and incidental transactions.
Relevant receipts may include interest, foreign exchange income or other amounts arising alongside the main investment activity.
Removing the threshold could reduce the risk that a relatively small increase in ancillary income disrupts the concession.
It does not necessarily mean that every source of ancillary or operating income will become exempt. The transaction must still fall within the final statutory treatment, and ordinary business income may remain taxable.
SPE treatment would improve
Funds and family offices frequently use special-purpose entities to hold assets, ring-fence liabilities and organise financing or exits.
The Bill proposes to relax the exemption treatment for SPEs and family-owned SPEs.
More flexible holding chains
A concession available at fund or FIHV level can lose practical value if income or gains become taxable lower in the ownership structure.
Broader SPE treatment could improve the position for portfolios involving:
- overseas real estate;
- private companies;
- infrastructure assets;
- joint ventures;
- private credit;
- digital assets; and
- layered regional holdings.
The final analysis will still depend on ownership percentages, asset types and the relationship between the principal vehicle and each SPE.
Anti-avoidance rules remain relevant
The reform should not be treated as a general exemption for every subsidiary.
Existing rules already restrict concessionary treatment for some private-company investments, particularly where the underlying company holds Hong Kong immovable property or does not satisfy relevant holding and control tests.
Businesses should map the complete structure rather than assess only the top fund or FIHV.
Funds face new compliance duties
The Bill expands eligibility but also introduces additional obligations.
The Government proposes a tax reporting mechanism and economic substance requirements for funds using the unified exemption. These requirements would be similar to those already applying under the FIHV regime.
Economic substance
Funds may need to demonstrate that adequate core income-generating activities are carried out in Hong Kong.
The final rules may examine:
- local investment management;
- qualified employees;
- operating expenditure;
- outsourced activities;
- decision-making;
- record keeping; and
- the scale of Hong Kong operations.
This represents a material change for structures that currently rely on the unified fund exemption with limited local activity.
Reporting mechanism
A formal reporting requirement would give IRD more information about funds claiming the exemption.
Managers should expect to retain evidence covering:
- fund status;
- investor composition;
- qualifying assets;
- transaction income;
- SPE ownership;
- economic substance;
- incidental receipts; and
- the basis for claiming exemption.
The expanded asset list may therefore provide more investment flexibility while increasing the quality of documentation required.
Family offices gain wider coverage
The reform aligns the FIHV regime more closely with the portfolios held by international families.
Hong Kong reported more than 3,380 single family offices operating in the city by the end of 2025. The underlying study also estimated that these offices directly employed more than 10,000 professionals.
The figure provides useful market context, although it is an estimate rather than a count from a mandatory family office register.
Diversified family portfolios
Modern family office portfolios may include:
- private equity;
- listed securities;
- private credit;
- venture debt;
- digital assets;
- foreign real estate;
- commodities;
- precious metals;
- hedge funds;
- carbon assets; and
- insurance-linked investments.
A broader statutory list reduces the need to separate certain alternative assets from the principal Hong Kong investment structure solely because they fall outside the current tax schedule.
Entry conditions remain
The wider asset perimeter does not remove the existing eligibility requirements.
An FIHV must still satisfy the applicable family ownership test, management arrangements, minimum asset threshold and Hong Kong substance requirements.
The eligible single family office must also meet its own ownership and income conditions. Under the current safe harbour, at least 75% of its assessable profits must arise from services provided to specified family persons and vehicles.
Licensing remains separate
A genuine single family office managing only family assets may fall outside some licensing requirements.
That conclusion depends on the activities, legal entities and clients involved.
A business managing assets for unrelated investors or providing regulated services beyond the family group may require authorisation from the Securities and Futures Commission.
The tax concession should never be used as evidence that a family office is unregulated.
Carried interest is also covered
The Bill includes a series of measures concerning Hong Kong’s preferential tax regime for eligible carried interest.
Carried interest is performance-related participation commonly received by fund managers and investment professionals after specified return conditions are met.
The reform may improve the interaction between carried interest treatment and the expanded fund regime.
Managers should still review:
- fund certification;
- eligible transactions;
- qualifying recipients;
- employment and service arrangements;
- performance conditions;
- timing of entitlement; and
- documentation supporting the carried interest allocation.
The final article treatment should follow any amendments or explanatory materials issued as the Bill progresses.
Filing before enactment
IRD’s transitional measure gives affected taxpayers a practical filing route for the 2025/26 year.
It does not eliminate legislative risk.
Records should support the position
A taxpayer relying on the proposed treatment should retain a clear file showing:
- which provision of the Bill applies;
- which assets or transactions qualify;
- how the vehicle meets the relevant definition;
- whether substance requirements are satisfied;
- how incidental receipts were calculated; and
- which SPEs are included.
The filing position should be reviewed once the final Ordinance is published.
Returns may need amendment
IRD expressly states that taxpayers should monitor enactment and notify the Department where a submitted return requires revision.
Businesses should avoid distributing funds or finalising investor tax reporting solely on the assumption that the Bill will pass unchanged.
Hong Kong strengthens its wealth platform
The reform forms part of Hong Kong’s wider strategy to attract investment managers and international wealth.
The Government describes Hong Kong as the world’s largest cross-boundary wealth management centre and has committed to facilitating at least 220 family offices in establishing or expanding local operations between 2026 and 2028.
Regional competition continues
Hong Kong competes with Singapore, Dubai and other international centres for funds, family offices and investment professionals.
Tax treatment is only one part of that competition.
Businesses also assess:
- regulatory certainty;
- banking access;
- capital markets;
- legal infrastructure;
- treaty networks;
- talent;
- immigration;
- operating costs;
- political risk; and
- proximity to investment opportunities.
The Bill strengthens Hong Kong’s tax proposition, particularly for portfolios that combine traditional securities with private markets and alternative assets.
Structuring points to review
Fund sponsors and families should not wait for enactment before assessing the commercial impact.
A review should cover:
- Whether the vehicle qualifies as a fund, FIHV or ordinary investment company.
- Whether a fund-of-one can use the expanded definition.
- Which proposed asset category covers each investment.
- Whether loans amount to investment activity or a money-lending business.
- Whether digital-asset activity requires separate licensing.
- Whether overseas property is held directly or through SPEs.
- Whether private-company anti-avoidance tests apply.
- Whether the HK$240 million FIHV threshold is met.
- Whether Hong Kong substance is sufficient.
- Whether incidental receipts currently exceed 5%.
- Whether the 2025/26 transitional filing measure should be used.
- Whether restructuring creates stamp duty, disposal or source-of-profit issues.
A tax-efficient vehicle may still be unsuitable where its regulatory, governance or operational requirements do not match the family or fund’s activities.
The reform is broader, not automatic
The Bill would materially improve Hong Kong’s tax framework for diversified funds and family offices.
Private credit, digital assets, overseas real estate, precious metals and carbon assets are among the clearest beneficiaries.
The reform is not a blanket exemption for alternative investments. Eligibility will continue to depend on vehicle status, qualifying transactions, ownership, substance, SPE arrangements and anti-avoidance rules.
The new reporting and substance requirements also mean that some funds will face greater compliance obligations despite gaining access to a wider asset list.
Legasset supports fund sponsors, investment firms and international families with Hong Kong market-entry planning, holding and fund structuring, family office establishment, digital-asset regulatory analysis and cross-border transaction support. Implementation of the proposed tax concessions should be coordinated with qualified Hong Kong tax advisers.
FAQ: Hong Kong fund and family office tax concessions
Has the Hong Kong Bill become law?
No.
The Bill was gazetted on 12 June 2026 and introduced into the Legislative Council on 24 June 2026. It remains under Bills Committee scrutiny.
When would the new rules apply?
The Government proposes that the relevant measures apply from the 2025/26 year of assessment.
The final position depends on enactment.
Can taxpayers file under the proposals now?
IRD currently allows apparently eligible taxpayers to submit 2025/26 returns on the basis of the proposed concessions.
This is a transitional administrative measure. A return may need revision after the legislation passes.
Would digital assets qualify?
The Bill proposes to add digital assets to the qualifying investment scope.
This would not remove licensing, custody, AML/CFT or securities-law requirements.
Would private credit qualify?
Loans and private credit investments are central parts of the proposed expansion.
The precise treatment will depend on the enacted definitions and whether the activities constitute investment or an active lending business.
Would overseas property qualify?
The proposals include immovable property situated outside Hong Kong.
Hong Kong property remains subject to separate rules and restrictions.
Are private-company investments new?
No.
The current FIHV regime already includes specified securities and debt instruments issued by private companies.
The Bill would improve the wider treatment of qualifying assets and investments held through SPE structures.
Is the 5% incidental income limit being removed?
Yes, the Bill proposes to remove the existing 5% threshold for incidental transactions.
Other eligibility and anti-avoidance rules may still apply.
Does the Bill remove the HK$240 million threshold?
No removal has been identified in the published proposal.
The existing minimum asset threshold remains a central condition for the FIHV concession.
What is the tax rate for a qualifying FIHV?
The current concessionary rate is 0% on qualifying profits where all statutory conditions are satisfied.
The Bill would broaden the transactions and assets capable of receiving that treatment.
Does a Hong Kong family office need an SFC licence?
Not always.
A genuine single family office serving only the relevant family may fall outside licensing requirements. The position changes where the office manages third-party assets or conducts regulated activities as a business.
Topic-Specific Official Resources and Regulatory Materials
Official Government announcement dated 12 June 2026 summarising the expansion of the fund, family-owned investment holding vehicle and carried interest tax regimes.
II. Hong Kong Legislative Council — Inland Revenue Amendment Bill 2026
Official text of the Bill proposing wider fund definitions, qualifying investments, SPE treatment, incidental transaction relief, reporting and substance requirements.
III. Hong Kong Legislative Council — Legislative Council Brief on the preferential tax regimes
Official policy and legislative brief explaining the objectives, principal amendments and intended application of the proposed tax measures.
IV. Hong Kong Legislative Council — Bills Committee meeting on 8 July 2026
Official committee page for the Legislative Council’s scrutiny of the Bill, including the meeting agenda and related legislative materials.
V. Hong Kong Inland Revenue Department — Transitional filing measure for 2025/26
IRD notice permitting eligible taxpayers to file 2025/26 returns on the basis of the proposed concessions while warning that revisions may be required after enactment.
VI. Hong Kong Inland Revenue Department — Tax concessions for family-owned investment holding vehicles
Current IRD guidance on FIHV ownership, management, minimum assets, Hong Kong substance, qualifying transactions, SPEs and the 0% concessionary rate.
VII. Hong Kong Government — Study on single family offices operating in Hong Kong
Official Government release reporting the estimated number, employment contribution and economic activity of single family offices operating in Hong Kong.
