Hong Kong to expand tax exemptions for family offices, AIIB and pension fund investment

Hong Kong will expand its tax exemptions for operators of family offices and funds set up by international organisations, such as the Asian Infrastructure Investment Bank (AIIB), in line with efforts to promote the city as a wealth management hub, a minister told lawmakers on Monday.In a financial affairs panel meeting, Secretary for Financial Services and the Treasury, Christopher Hui Ching-yu, said the government would submit a bill to the Legislative Council within the first half of this year that would make more products that family offices and funds invest in eligible for tax exemptions. These include private credit, gold and other commodities, carbon credit, insurance-linked securities and certain digital assets.At present, only traditional investment products such as stocks and bonds qualify.“By expanding the investment products under tax exemption, the proposed enhancements seek to attract more funds and family offices to set up and operate in Hong Kong, which will help reinforce the city’s position as a leading asset and wealth management hub,” Hui said.The proposed law would also expand the types of funds to get the exemption, from open-ended funds at present to charity funds, pension funds and so-called fund-of-one structures set up by international organisations, such as the AIIB. This initiative is expected to attract sizeable asset owners to set up and manage funds in Hong Kong.Many international organisations, governments, central banks and ultra-high-net-worth individuals are known to establish so-called fund-of-one structures, which are wholly owned funds set up by their issuers to carry out specific investments. The new rule would require a fund-of-one structure to have at least HK$240 million (US$31 million) in qualified assets to enjoy the tax exemption.“The expanded scope of qualifying investments would also complement Hong Kong’s development in areas such as digital assets and trading of precious metals and commodities,” Hui said.