Setting Up a Family Office in Hong Kong
Hong Kong is a leading international financial and runs on its own system based on Common Law and the free flow of capital. Hong Kong adheres to world class regulatory standards and boasts a robust banking sector and transparent and low tax regime. Over the years, it has become a preferred destination and a leading hub for family offices from around the world.
Family Offices (FO) is an organisation that manages private wealth and other matters for one family or multiple families, supports their family legacy, vision, and wealth. The most common organization of Family Office is Single Family Office (SFO) and Multi Family Office (MFO). SFO serves for one family only while MFO serves for multiple families. Our introduction here is focusing on SFO.
As each family is unique, the services provided to each FO should be specifically catered to the family’s needs. The common services FO can provide include investment management services, wealth succession, financial advisory, tax planning, charity management and family governance.
1. SFO Structure
FOs can take different structures, usually they are set up to provide services to a family-owned investment holding vehicle (FIHV). Fos will sign different agreements with FIHVs to define the roles and arrangements between them. A common structure of SFO is as follows:
2. License and Tax
SFOs are generally solely provide services to one family-owned entities therefore SFOs are not required to obtain financial licenses.
On 19 May 2023, The Inland Revenue (Amendment) (Tax Concessions for Family-owned Investment Holding Vehicles) Ordinance 2023 (the Ordinance) was gazetted and came into effect, FIHVs satisfying the relevant requirements under the Ordinance will be taxed at a zero concessionary tax rate.
Below lists some key factors under the Ordinance:
(1) An eligible SFO must be a private company incorporated in or outside Hong kong and normally managed or controlled in Hong Kong
(2) At least 95% of its beneficial interest is held by family members during the year,
(3) At least 75% of the SFO’s profits are derived from the services provided to specified persons of the family,
(4) FIHV must only serve as an investment vehicle for holding and administering the assets for the single family, and must not directly engage in activities for general commercial purposes,
(5) No more than 50 FIHVs managed by the same eligible SFO may benefit from the tax concession,
(6) The aggregate amount of the net asset value held by FIHVs shall be at least HKD240 million,
(7) Each FIHV should incur at least HKD 2 million annual operating expenditure in Hong Kong for carrying out investment activities for the year and employ at least two full-time qualified employees in Hong Kong,
(8) SFOs and FIHVs are required to file annual tax returns with the IRD.
3.Compliance and Reporting requirements
Security and Financial Committee is the main regulatory body of family office.in general, if a SFO is an operating entity providing regulated asset management services sole to the family, the related entities or wholly owned subsidiary, a license is not required. the other requirements are as follows:
(1) filing of an annual return and renewal of a BRC with government fees are required annually,
(2) An annual general meeting must be held in respect of each financial year of the company,
(3) the audited financial statements must be prepared annually,
(4) the audited financial statements are also required to be submitted to the IRD for annual tax filing purposes together with profits tax returns, IRD may assess tax concessions for FIHV based on the actual operations.
4.Immigration and Visa
Under the General Employment Policy, foreign nationals for FOs can consider two types of visas:
(1) Employment visa, foreign nationals who are to perform services or work in Hong Kong must obtain an employment visa prior to commencing work in Hong Kong. Employment visas may be issued for periods of up to two years and may be renewed subject to all criteria being met,
(2) Investment visa, applicable to foreign entrepreneurs who plan to establish or join in a business and make a substantial contribution to the Hong Kong economy.
Mainland China residents wanting to work for FOs in Hong Kong can consider the following visas:
(1) Admission Scheme for Mainland Talents and Professionals: this is for candidates possessing special skills, knowledge, or experiences,
(2) Technology Talent Admission Scheme: this is for technology talent to undertake research and development work in Hong Kong,
(3) Immigration Arrangements for Non-local Graduates: this is for non-local students who obtained an undergraduate or higher qualification in Hong Kong,
(4) Top Talent Pass Scheme: this is for individuals whose annual salary reaced HKD2.5 million or above in the past year, or individuals who graduated from the world’s top 100 universities.
Family members of applicants can accompany applicants via dependent visas.
Kaizen is equipped with experienced and qualified professional consultants and is positioned to provide a package of services to set up a family office in Hong Kong for high net worth individuals including registration, compliance, taxation, auditing, accounting, visas and immigration etc. Kaizen is also providing professional consultancy on the structures of family office, establishment of family trust, establishment of charity foundation, family wealth succession and family governance etc. We believe the mission of a Family Office is not only to maintain and increase the value of family wealth, but also to pass on family harmony and traditional family values to future generations. Please call our Family Office advisor for details.
If you need assistance or wish to obtain more information, please visit our official website at www.kaizencpa.com or contact us through the following methods:
E: info@kaizencpa.com T: +852 2341 1444
M: +852 5616 4140, +86 1521 9434 614
WhatsApp/Line/WeChat: +852 5616 4140
Skype: kaizencpa
