Hong Kong: Developments related to taxation of family offices

There have been a number of important developments related to the taxation of family offices in Hong Kong:

• Amendments proposed by the government to the bill on the proposed tax concession regime for family-owned investment holding vehicles (FIHVs)
• Introduction of a new Form IR1479 to be completed and filed by FIHVs electing to enjoy the proposed tax concession
• The government’s policy statement on developing family office businesses in Hong Kong

The Hong Kong government on 9 December 2022 published draft legislation implementing the profits tax exemption regime for FIHVs managed by eligible single-family offices (ESFOs) in Hong Kong. Read TaxNewsFlash

The new regime would provide—effective from year of assessment (YOA) 2022/2023—a 0% tax rate for assessable profits derived by FIHVs owned by ultra-high-net-worth individuals and their family members from qualifying transactions and incidental transactions (subject to a 5% threshold), subject to fulfillment of the specified conditions.

Having considered submissions made by various parties, the government has proposed the following amendments to the bill:

• Replacing the “central management and control” requirement with the “normally managed or controlled” requirement
• Relaxing the beneficial interest requirement for ESFOs and FIHVs to allow one or more charitable entities to have beneficial interest in an ESFO and/or FIHV of up to 25%
• Adding provisions dealing with complex holding structures involving multiple “specified trusts”
• Clarifying that there is no tainting effect of non-qualifying transactions

Starting from the year of assessment 2022/2023, FIHVs electing to enjoy the proposed tax concession are required to complete and file Form IR1479 electronically together with their profits tax return. Only high-level information about (1) the taxpayer, the ESFO and any family-owned special purpose entities (FSPEs), (2) the net asset value of Schedule 16C assets managed by the ESFO, and (3) the fulfilment of the economic substance requirement is required to be reported in the form. In addition, taxpayers are only required to tick the appropriate boxes in the form or input the relevant numerical figures for most of the information requested. 

However, Form IR1479 is required to be submitted together with a statutory declaration in paper form to confirm that a person is a member of the family concerned for a given year of assessment. The sample statutory declaration has not yet been made available on the government’s website. It has yet to be seen whether each family member has to make a separate declaration and how much details about the family members are required to be disclosed in the declaration(s). 

Separate profits tax returns must be filed by FSPEs (if applicable) and an election for the FSPEs to enjoy the proposed tax concession must be made in the returns filed by the FSPEs. 

The government on 24 March 2023 issued a policy statement on developing family office businesses in Hong Kong which discussed the following policy measures:

• New capital investment entrant scheme
• Market facilitation measures
• Talent development services
• Expansion of the role of the dedicated family office team of InvestHK
• Other tax concession measures

For more information contact a KPMG tax professional:

David Ling | davidxling@kpmg.com