Hong Kong Family Office Tax Concession: FIHV Regime and Eligibility Criteria

Hong Kong Family Office Tax Concession: Eligibility and Benefits for FIHVs

The hong kong family office tax concession provides a targeted profits tax exemption under the Inland Revenue Ordinance (Cap. 112) for qualifying single family offices and their associated family investment holding vehicles (FIHVs). Legislative amendments passed in LegCo in 2023 introduced this concession to encourage ultra-high-net-worth families to establish and manage their family offices in Hong Kong.

Eligibility for the Hong Kong Family Office Profits Tax Exemption

To qualify for the hong kong family office profits tax exemption, the structure must meet several conditions set out in the Inland Revenue Ordinance. The regime applies to a family office that is a "specified family office entity" (SFOE) and to its underlying FIHVs.

Minimum Asset Threshold: HK$240 Million

The family office must manage, on behalf of a single family group, total assets of at least HK$240 million. This asset threshold is assessed at the level of the family investment holding vehicles (FIHVs) that are part of the structure. Assets held by the family office itself, as opposed to the FIHVs, are not counted. The Hong Kong Monetary Authority (HKMA) has issued guidance on how to calculate the value of assets. Included are cash, securities, private company shares, and other investment assets. The threshold ensures the regime targets genuinely wealthy families.

Single Family Office Structure

The concession is restricted to single family office arrangements. The family office must serve only one family group, defined broadly to include multiple generations and related individuals. It cannot offer services to unrelated third parties. A family office that provides services to multiple families falls outside the scope of the concession and is subject to the general profits tax rules at the standard two-tiered rates: 8.25% on the first HK$2,000,000 of assessable profits and 16.5% on the remainder. The single family office requirement is central to the family office tax concession hong kong eligibility.

Economic Substance in Hong Kong

The family office must have a sufficient degree of economic substance in Hong Kong. The IRD examines whether the family office employs a reasonable number of qualified persons in Hong Kong and incurs a reasonable amount of operating expenditure in the territory. It will also consider whether the family office has its own premises, employs staff with relevant investment experience, and conducts substantive investment activities from Hong Kong. The economic substance requirement is similar to that applied under the FSIE regime for intellectual property income, though the criteria are tailored for family offices. This prevents the regime from being used by families with minimal presence in Hong Kong.

The Tax Benefit: Exemption From Profits Tax on Qualifying Transactions

The central benefit of the hong kong unified family office regime is that qualifying transactions carried out by the FIHVs are treated as not arising in or derived from Hong Kong for profits tax purposes. The FIHVs are exempt from Hong Kong profits tax on their trading profits from qualifying transactions, even if those transactions are managed and executed in Hong Kong. This is a significant departure from the general territorial source principle, under which profits sourced in Hong Kong are chargeable.

Qualifying Transactions

The concession covers a wide range of asset classes and transactions: - Dealing in securities, including shares, bonds, and derivatives. - Transactions in futures, foreign exchange, and commodities. - Investments in private companies (equity or debt). - Transactions in digital assets, subject to the conditions in the ordinance. - Any other investment activities that the Financial Secretary declares to be qualifying transactions by notice in the Gazette.

The list is broad enough to cover most typical family office investment strategies. Active trading and long-term holding both fall within scope.

Interaction with the General FSIE Regime

The family office concession operates independently of the general foreign-sourced income exemption (FSIE) regime that took effect on 1 January 2023 and was expanded from 1 January 2024 to cover disposal gains. Under the FSIE regime, covered income, interest, dividends, disposal gains, and intellectual property income, received in Hong Kong by a member of a multinational enterprise group is deemed to be chargeable unless an exception applies. The family office concession is not subject to the FSIE rules because it creates a specific statutory exemption for qualifying transactions of FIHVs. A family office that qualifies for the concession is not required to satisfy the economic substance requirement under the FSIE regime for those transactions. The family office must still comply with general reporting obligations, including filing Form BIR51 (profits tax return) and any supplementary forms as directed by the IRD.

Capital Gains vs Trading Profits

The concession applies to trading profits, not only capital gains. Under Hong Kong's territorial source principle, capital gains are generally not chargeable to profits tax unless they arise from a trade. The family office concession extends the exemption to trading profits that would otherwise be chargeable if the transactions were regarded as sourced in Hong Kong. This removes any need for the family office to argue that its activities do not constitute a trade or that the profits are offshore. The concession creates a clear, predictable outcome for qualifying FIHVs.

Administration and Reporting

The family office must notify the IRD of its intention to rely on the concession as part of its annual profits tax return. The IRD may request supporting documentation, including evidence of the asset threshold, the single family office structure, and the economic substance in Hong Kong. The HKMA provides guidance on the administration of the regime, but the IRD remains the authority for assessing compliance. Maintain records of all qualifying transactions and the basis on which they are treated as exempt.

Key Practical Considerations

Asset Threshold Verification

Demonstrate that the FIHVs collectively hold assets of at least HK$240 million. This may require annual valuations and regular reporting to the family office. The asset threshold is not a one-off test. It must be met throughout the period for which the concession is claimed. If the assets fall below the threshold, the exemption ceases to apply for that year of assessment.

Single Family Office Definition

The definition of a single family office is not rigidly tied to a specific legal structure. The family office can be a company, a partnership, or another entity. What matters is the functional test: does the entity serve only one family group? Families that operate multiple family offices, one for each branch of the family, for instance, may need to ensure each qualifies separately. The IRD looks at the substance of the arrangement rather than the form.

Compliance with the FSIE Regime

Although the family office concession overrides the FSIE rules for qualifying transactions, FIHVs may still receive other types of income that fall within the FSIE regime. Interest from a deposit account with a Hong Kong bank is one example. Review all income streams to determine whether the FSIE rules apply. Where they do, the economic substance requirement or another exception must be satisfied to avoid Hong Kong profits tax.

Summary of the Regime

Disclaimer: This information is a general guide. Families considering establishing a family office in Hong Kong should seek professional tax advice tailored to their specific circumstances. The information reflects the law as at August 2026.