Family Office Structures in Hong Kong: Tax Efficient Wealth Management Solutions
Part 1: Comparative Analysis of Family Office Structures
Introduction
Hong Kong has emerged as a premier jurisdiction for establishing family offices in Asia, bolstered by its strategic location, robust legal framework, and favorable tax environment. As wealth in the Asia-Pacific region continues to grow exponentially, high-net-worth families are increasingly turning to family office structures to manage their assets, preserve wealth across generations, and optimize their tax positions. This first article in our three-part series examines the various family office structures available in Hong Kong and the latest regulatory developments affecting each option.
Single Family Office (SFO)
The Single Family Office is dedicated to serving one wealthy family, typically with assets exceeding US$100 million. In Hong Kong, SFOs are commonly structured as private companies limited by shares under the Companies Ordinance.
Key advantages:
- Complete control and privacy
- Customized investment strategies aligned with family values
- Dedicated focus on the family’s specific needs
- Greater flexibility in governance and decision-making
Considerations:
- Higher operational costs due to dedicated staffing
- Limited economies of scale compared to multi-family options
- Potential licensing requirements depending on activities conducted
Recent Regulatory Developments for SFOs
The Hong Kong government launched its “Family Office Hong Kong” initiative in April 2023, introducing significant incentives specifically designed to attract family offices:
- Licensing Clarity: In October 2024, the Securities and Futures Commission (SFC) issued dedicated guidance clarifying that SFOs managing only proprietary assets of a single family are generally not required to obtain an asset management license, provided they meet certain conditions.
- Tax Concession Scheme: Effective January 1, 2024, qualifying SFOs can enjoy a profits tax exemption on eligible transactions if they:
- Maintain at least HK$240 million in assets under management
- Employ at least two full-time employees in Hong Kong
- Incur at least HK$2 million in annual operating expenditure in Hong Kong
- Investment Migration Pathway: The Capital Investment Entrant Scheme (CIES) was reintroduced in December 2024, providing residence pathways for family principals who invest at least HK$30 million in permissible asset classes (excluding real estate).
- Enhanced Support Services: The InvestHK Family Office team has expanded to provide dedicated one-stop support services, including the appointment of a “Family Office Liaison Officer” for each qualifying family office.
Multi-Family Office (MFO)
MFOs serve multiple unrelated families, pooling resources and expertise. In Hong Kong, these typically operate as licensed asset management companies.
Key advantages:
- Cost sharing across multiple families
- Access to broader investment opportunities
- Economies of scale for investment and administrative functions
- Professional management and established infrastructure
Considerations:
- Less control and potential conflicts of interest
- Lower degree of customization
- Privacy concerns when sharing services with other families
Recent Regulatory Developments for MFOs
- Enhanced Licensing Framework: In March 2024, the SFC introduced a specialized licensing pathway for MFOs, with adjusted competency requirements focusing on wealth management expertise rather than traditional fund management experience.
- Client Identity Requirements: New regulations effective September 1, 2024 require MFOs to implement more stringent “know-your-client” procedures specifically tailored to family office structures, including verification of family relationships.
- Fee Disclosure Standards: The SFC issued new guidelines in January 2025 specifically addressing fee structures for MFOs, requiring greater transparency in fee arrangements and potential conflicts of interest.
Private Trust Company (PTC) Structure
A popular structure for Hong Kong family offices involves establishing a Private Trust Company that acts as trustee for family trusts.
Key advantages:
- Separation of legal ownership and beneficial enjoyment
- Greater control compared to commercial trustees
- Excellent vehicle for succession planning
- Enhanced asset protection
Considerations:
- More complex governance requirements
- Need for professional directors and proper administration
- Higher setup and maintenance costs
Recent Regulatory Developments for PTCs
- Regulatory Exemption Clarification: In June 2024, the Hong Kong Monetary Authority issued expanded guidance on the PTC exemption regime, confirming that PTCs acting as trustees of specific family trusts remain exempt from trust company licensing requirements.
- Economic Substance Requirements: New economic substance guidelines issued in November 2024 clarified that properly established PTCs with genuine management and control in Hong Kong will not be subject to adverse tax consequences under global minimum tax initiatives.
- Corporate Service Provider Regulation: The new Hong Kong Company Service Provider licensing regime, which came into full effect on March 1, 2025, impacts service providers to PTCs, requiring enhanced due diligence and compliance procedures.
- Central Register of Trusts: The government has proposed (but not yet implemented) a confidential central registration system for trusts with Hong Kong trustees, which would impact PTCs. The consultation phase concluded in December 2024, with implementation expected by 2026.
Family Investment Holding Company (FIHC)
An increasingly popular structure involves establishing a Hong Kong-incorporated Family Investment Holding Company to hold and manage family assets.
Key advantages:
- Simple corporate structure with established legal framework
- Limited liability protection
- Flexibility in governance arrangements
- Potential application of tax incentives for specified activities
Considerations:
- Less privacy compared to trust structures
- Potential estate duty implications in other jurisdictions
- Need for careful structuring to maximize tax benefits
Recent Regulatory Developments for FIHCs
Corporate Tax Rate Benefits: The two-tiered profits tax regime has been extended through 2028, allowing eligible FIHCs to benefit from a reduced rate of 8.25% on the first HK$2 million of profits.
Financial Reporting Exemptions: Amendments to the Companies Ordinance effective April 1, 2024 expanded the eligibility criteria for simplified reporting, potentially reducing compliance burdens for qualifying FIHCs.
Enhanced Anti-Avoidance Provisions: The Inland Revenue Department issued practice note 21E in December 2024, outlining specific considerations for private investment companies, including circumstances where corporate structures could be challenged.
Conclusion
Hong Kong offers multiple structures for establishing family offices, each with distinct advantages and considerations. Recent regulatory developments have generally enhanced Hong Kong’s attractiveness as a family office hub, with targeted initiatives designed to attract and retain substantial family wealth in the jurisdiction.
When selecting the optimal structure, families should consider their specific needs, objectives, and circumstances, including family size, asset composition, geographic dispersion, and succession goals. Professional guidance from accountants, tax advisors, and legal counsel with specific expertise in Hong Kong’s family office ecosystem is essential to navigate this complex and evolving landscape.
In our next article, we will explore tax considerations for different investment types held through Hong Kong family office structures, including recent changes to the tax treatment of various asset classes.
If you have any question, please feel free to contact us and check our website: https://www.serviceonnewgrounds.com
References
- InvestHK. (2024). “Family Office Hong Kong” Initiative Overview. Retrieved from https://www.familyoffice.hk/
- Securities and Futures Commission of Hong Kong. (2024, October). “Licensing Requirements for Single Family Offices.” SFC Circular. Retrieved from https://www.sfc.hk/
- Hong Kong Monetary Authority. (2024, June). “Expanded Guidance on the Private Trust Company Exemption Regime.” HKMA Circular. Retrieved from https://www.hkma.gov.hk/
- Inland Revenue Department. (2024). “Tax Concession for Family-Owned Investment Holding Vehicles.” Departmental Interpretation and Practice Notes No. 61. Retrieved from https://www.ird.gov.hk/
- Immigration Department of Hong Kong. (2024, December). “Capital Investment Entrant Scheme (CIES) – Reintroduction Guidelines.” Retrieved from https://www.immd.gov.hk/
