LCQ9: Promoting the establishment of family offices in Hong Kong
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Question:
The Inland Revenue (Amendment) (Tax Concessions for Family-owned Investment Holding Vehicles) Ordinance 2023 (the Amendment Ordinance) commenced operation on May 19, 2023 upon its gazettal, providing profits tax concessions for family-owned investment holding vehicles managed by single family offices in Hong Kong. In this connection, will the Government inform this Council:
(1) for the two years of assessment 2022-2023 and 2023-2024, of the following information on the single family offices eligible for the profits tax concession under the Amendment Ordinance in each year: (i) the number, (ii) the average number of full-time employees, (iii) the average operating expenditure, as well as (iv) the average amount and (v) the total amount of tax reduction received, and set out in the table below with a breakdown by the size of asset under management (AUM) (i.e. (a) $240 million to below $390 million, (b) $390 million to below $780 million, and (c) $780 million or above);
Year of assessment:
| AUM size of family offices |
(i) | …… | (v) |
| (a) | |||
| (b) | |||
| (c) |
(2) of the latest number of family offices in Hong Kong at present, and whether the Government has studied the growth trend of family offices in recent years; whether the Government has collected data or conducted surveys to gain an understanding on the office space demand and trends of family offices in Hong Kong (e.g. size and types of office space required, including traditional offices, co-working spaces and other types of facilities), as well as the key challenges they face in recruiting professional talent;
(3) of the number of family offices that have been established in Hong Kong with the assistance or facilitation of the dedicated FamilyOfficeHK team of Invest Hong Kong (InvestHK) since 2021, and the respective numbers of inquiries and follow-up cases handled; among these cases, of the common concerns of individuals who are interested in or have already established family offices in Hong Kong (set out by key areas of concern); and
(4) as the Government has earlier on indicated that it would further enhance the preferential tax regime for family offices, will the Government consider expanding the scope of the preferential tax regime to cover multi-family offices?
Reply:
President,
Family office (FO) business is an important segment of the asset and wealth management (WAM) sector in Hong Kong. According to the research findings of the consultant commissioned by Invest Hong Kong (InvestHK), there were around 2 700 single FOs operating in Hong Kong as of end-2023. The number is expected to exceed 3 000 in the near future. As of end-2024, the size of private banking and private wealth management business attributed to FOs and private trusts clients reached HK$1,551 billion, providing significant business opportunities for the WAM sector and other related professional services. In consultation with the Inland Revenue Department and InvestHK, the reply to various parts of the question is as follows:
(1) The Government issued the Policy Statement on Developing Family Office Businesses in Hong Kong in March 2023 to set out eight measures with a view to creating a conducive and competitive environment for the businesses of global FOs and asset owners to thrive in Hong Kong. As one of the support measures, the Inland Revenue (Amendment) (Tax Concessions for Family-owned Investment Holding Vehicles) Ordinance 2023 came into operation on May 19, 2023, and applies in respect of a year of assessment commencing on or after April 1, 2022. Family-owned investment holding vehicles (FIHVs) managed by single FOs in Hong Kong fulfilling the minimum asset threshold of HK$240 million and substantial activities requirement can enjoy profits tax exemption for qualifying transactions.
The FO sector has responded positively to the measures set out in the Policy Statement, including the preferential tax regime, the New Capital Investment Entrant Scheme (New CIES) and the Hong Kong Academy for Wealth Legacy (HKAWL). The number of FOs interested in setting up or expanding their business in Hong Kong has also increased. That said, a relatively small number of applications for tax concession for FIHVs have been received in the years of assessment 2022/23 and 2023/24 as the tax concession regime is still at its early stage. In this light, it may not be appropriate to disclose relevant data to avoid disclosing the information of the taxpayers. Furthermore, since the industry needs time to adjust their operations in order to meet the eligibility requirements for tax concession, the current number of applications may not be an appropriate indicator of the effectiveness of the tax concession regime.
(2) and (3) The Government actively promotes the development of FO business and strengthens advantages in developing the WAM industry and related professional service sectors in Hong Kong. The Government has maintained close communication with the FO sector to understand the development needs of FOs. The dedicated FamilyOfficeHK team of InvestHK has already assisted 50 FOs to set up or expand their business in Hong Kong in the first five months of 2025, representing a 19 per cent increase compared with the same period last year. Separately, around 150 FOs have indicated that they are preparing or have decided to set up or expand their business in Hong Kong. The statistics since the establishment of the dedicated team in June 2021 are summarised as follows:
| Enquiries / Follow-up cases | FOs assisted by the dedicated team to set up or expand business in Hong Kong | |
| 2021 (June to December) |
46 | 9 |
| 2022 | 55 | 12 |
| 2023 | 649 | 26 |
| 2024 | 648 | 95 |
| 2025 (January to May) |
306 | 50 |
| Total | 1 704 | 192 |
For those who intend to or have set up FOs in Hong Kong, the dedicated team understands from the FO sector that their general areas of concern include compliance requirements, tax incentives and the availability of professionals, etc. However, the dedicated team does not maintain relevant statistics of the office space of FOs. Generally speaking, individual FOs have different requirements for the location, privacy and supporting facilities of their office space, and may also consider the operating costs and proximity to professional service firms, etc.
In response to the industry's view and to enhance the synergy between the New CIES and the establishment of FOs in Hong Kong, the Government has implemented enhancement measures with effect from March 1, 2025, including allowing applicants to make investments under the New CIES through an eligible private company managed by an eligible single FO as defined in Section 2 of Schedule 16E to the Inland Revenue Ordinance (IRO) and wholly owned by the applicant. These investments can be counted towards the applicant's eligible investment.
To meet the needs by FOs for professional talents, the Government is committed to expanding the talent pool in wealth management and FOs. We have since 2016 implemented the Pilot Programme to Enhance Talent Training for the Asset and Wealth Management Sector to nurture more industry talents. To date, over 4 800 applications for reimbursement of eligible professional training course fees have been approved, and the Programme has provided internship opportunities for over 1 100 tertiary students, supporting the industry to offer more professional training and learning opportunities, thereby enhancing the professional standards of practitioners. Besides, we have included "management professionals in WAM" and "professionals in compliance in WAM" under the Talent List since 2018 and 2021 respectively, so as to facilitate high-quality talents in these professions to pursue development in Hong Kong. The Government has also established the HKAWL in 2023 to provide a platform for collaboration, networking, knowledge sharing and talent development, and to provide relevant training for asset owners, wealth inheritors and the FO sector.
(4) The Government has announced in the 2025-26 Budget proposals to further enhance the preferential tax regime for single FOs, including increasing the types of qualifying transactions eligible for tax concessions for single FOs, such as transactions in emission derivatives/allowances, insurance-linked securities, loans and private credit investments, and digital assets, to attract more FOs to establish a presence in Hong Kong. The Government has completed the industry consultation on the enhancement measures on the preferential tax regimes, and is formulating the relevant enhancement measures in consultation with financial regulators based on the feedback received. The Government targets to work out the details by this year and submit the legislative proposals to the Legislative Council for consideration in 2026. If approved, the relevant measures will take effect from the year of assessment 2025/26.
The current preferential tax regime for FOs does not cover FIHVs managed by multi-FOs as they are generally independent service providers which are not owned by the relevant families. Multi-FOs may engage in the provision of investment management services or other financial services for third parties, which are essentially no different from the business of banks, private banks and WAM companies. Furthermore, if FIHVs of different families are managed by multi-FOs, there may also be difficulties in ascertaining whether the minimum asset threshold and substantial activities requirement of the FIHVs concerned are met. We need to critically examine the actual effectiveness and related fiscal implications of further extending the tax incentives to multi-FOs.
On the other hand, where an FIHV meets the definition of "fund" under the IRO and the qualifying transactions are carried out or arranged in Hong Kong by a licensed corporation of the Securities and Futures Commission (including multi-FOs), currently the relevant transactions are already eligible for tax exemption under the unified tax regime for funds.
Ends/Wednesday, July 30, 2025
Issued at HKT 14:15
Issued at HKT 14:15
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