Proposed tax concessions for family-owned investment holding vehicles

Legislative bill on the proposed tax concessions for family-owned investment holding vehicles managed by single-family offices published.

On 9 December 2022, the Inland Revenue (Amendment) (Tax concessions for family-owned investment holding vehicles) Bill 2022 (the Bill) was gazetted to introduce a dedicated tax concession regime (proposed regime) for family-owned investment holding vehicles (FIHVs) managed by eligible single-family offices (ESFOs) in Hong Kong . 

Prior to the introduction of the Bill, the HKSAR Government (the government) issued a consultation paper in March 2022 to solicit views from stakeholders on the key qualifying conditions of the proposed regime (the Consultation Paper). 

The proposed regime under the Bill is substantially similar to that outlined in the Consultation Paper, with certain enhancements made in response to feedbacks received from the stakeholders during the consultation exercise. The major enhancements include (i) expanding the legal forms of entities that can qualify as an FIHV; (ii) reducing the ownership requirements of an FIHV and an ESFO from “exclusively and beneficially” owned by a family to at least 95% beneficially owned by members of the family; and (iii) introducing a safe harbour rule to allow an ESFO to undertake business activities other than providing investment management services to FIHVs owned by the relevant family.

Subject to the passage of the Bill by the Legislative Council, the proposed regime will have a retrospective effect applying to a year of assessment commencing on or after 1 April 2022. 

This alert outlines the key requirements of the Bill and its major differences from the Consultation Paper, followed by our take on the proposed regime.

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