How Hong Kong is best positioned as a family office hub in Asia

As a well‐recognised premier international financial and wealth management centre with the second largest number of ultra-high-net-worth individuals (UHNWIs) in the world[1], Hong Kong offers many unique advantages for family offices to operate and grow, explains Christine Ho, deputy global head of FamilyOfficeHK at Invest Hong Kong.

A unique gateway connecting the East and the West
At the southern part of China, the city’s extensive geographical, cultural and linguistic links with the mainland and the distinctive advantage of “One country, two systems”, puts Hong Kong in a unique position as the gateway connecting the East and West. The city’s close ties with the mainland have long enabled it to act as an investment hub into and out of China. Hong Kong enjoys an ideal local in Asia that enables businesses to tap into the multitude of opportunities in the Guangdong, Hong Kong, Macao Bay area and the rest of the region.

Financial markets are mature and sophisticated, allowing it to satisfy the specific needs of wealthier families
Despite the impact of the COVID-19 pandemic, Hong Kong stands at third place in the global ranking of financial centers, following New York and London, according to the latest Global Financial Centers Index report. Moreover, as the city offers a broad spectrum of green and alternative investment opportunities popular among family offices, Hong Kong is well placed to accommodate the diversified investment needs of family offices. Next generations in Hong Kong have also embarked on their impact investment journeys. A nudge from the government on local opportunities would complement the global reach that many of them already have.

The maintenance of a robust regulatory regime continues to serve Hong Kong well and is a factor in attracting new entrants to the market
A concerted effort is warranted to create a more conductive operating environment for family offices and to enhance the ecosystem in which they operate without seeking to lower the regulatory bar. Hong Kong has been developing favorable policies and environment to attract more family offices and UHNWI investors since announcing the Chief Executive’s 2020 Policy Address and the 2021-2022 government budget. The Financial Services Development Council has been putting forward recommendations concerning the four key areas, including regulatory requirement, tax considerations, talent development and inter-disciplinary cooperation [2].

"Hong Kong has a long and impressive history of philanthropy."

Asia’s regional philanthropy hub
Hong Kong has a long and impressive history of philanthropy, now it is home to some of the world’s greatest philanthropists. The city has a long history of private investment in welfare and a culture that promotes individual social responsibility. Coupled with its existing role as a global center of business and commerce, Hong Kong is well positioned to lead Asia in addressing social needs.

Besides these advantages, Hong Kong is home to a diverse talent pool and has always maintained an open business environment for business activities and commerce, with a supportive government and robust system to safeguard monetary and financial stability.

A central contact point to support family offices was set up
InvestHong Kong announced on June 29, 2021, the opening of the independent office of its dedicated FamilyOfficeHK team, which aims to support family offices to set up and grow in the city.

FamilyOfficeHK offers a wide range of one-stop customised services, free of charge. It is also a central point of contact that can connect family offices with other relevant Government agencies and financial regulators, such as the Hong Kong Monetary Authority and Securities and Futures Commission.

FamilyOfficeHK’s services run through the whole business cycle of family offices.  During planning, the team offers advice and information to help business planning and structuring. During setup, we help facilitate to smooth the process – such as helping to identify service providers, advise visa applications, and employment and schooling options. During launching and expansion, the FamilyOfficeHK team support with business introduction, networking events and PR and media exposure and advise on HKSAR government initiatives and policies.

Apart from members from Hong Kong, the team is also expanding in mainland China and Europe. The diversity is aimed at gaining an all-round understanding of family offices in different countries so that the team can provide suitable help for family offices intending to come to Hong Kong.

More family offices focus policies/initiatives for family offices continuously launched/to be launched

Proposed profit tax concession

The Hong Kong SAR Government has started the consultation process on the proposed income tax exemption scheme for family office businesses in Hong Kong by distributing a draft bill to stakeholders.

According to the budget speech in February this year, the family office scheme is expected to come into force retroactively for the upcoming tax year (year of assessment) 2022 to 2023.

The proposal would exempt a family-owned investment-holding vehicle (FIHV) managed by a single-family office (SFO) from Hong Kong corporate income tax for its profits derived from some qualifying and incidental transactions (incidental transactions cannot exceed more than 5% of all transactions but will otherwise be taxable in Hong Kong if sourced there).

Limited partnership fund regime
The newly launched limited partnership fund (LPF) regime offers low setup and operation cost and tax exemption on carried interest (subject to meeting prescribed conditions) when the main investment activities of the fund are carried out in Hong Kong.  It is to better facilitate financial institutions including family offices to better take advantage of Hong Kong to access the Mainland China and the rest of Asia.

For further information, contact Christine Ho or Dixon Wong at FamilyOfficeHK.

Sources:
[1 The Wealth-X World Ultra Wealth Report 2021.
[2] Financial Services Development Council, FSDC paper No. 45.