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WeDigest > Family Office > Hong Kong: A Hub for Family Offices
Asia has seen phenomenal wealth creation over the last two generations, propelled by rapid economic growth in the region and an explosive rise in Chinese entrepreneurs. With such burgeoning wealth, there is growing demand for these ultra-high-net-worth families to adopt an integrative approach to help them address complex diverse issues such as asset and risk management, succession planning, as well as philanthropy.
As interest in family offices gains traction, Asia is positioned to be at the core of this new global boom, with Hong Kong being a popular destination. Hong Kong presents promising potential in advancing and expanding its wealth management landscape due to its array of advantages including its dynamic fast-paced business culture and well-established financial infrastructure with a robust ecosystem of wealth management professionals. We will successively delve into the various factors that compel Hong Kong to be a prime hub for family offices.
Hong Kong prides itself as a leading international financial centre built upon the foundations of a business-friendly environment and open economy. The city possesses an active and mature capital market, with superior offshore RMB liquidity. In addition, Hong Kong has demonstrated itself as a dominant asset and wealth management hub, especially within the hedge fund and private equity space. Its well-established financial industry is supplemented by globally-recognised service providers and a diverse pool of skilled talent in banking, tax consultancy, and legal fields. As a major global financial centre, investors can also benefit from Hong Kong’s integrated network of institutions to access a wide range of products and services for their investment or wealth planning needs.
Hong Kong prides itself as a leading international financial centre built upon the foundations of a business-friendly environment and open economy. The city possesses an active and mature capital market, with superior offshore RMB liquidity. In addition, Hong Kong has demonstrated itself as a dominant asset and wealth management hub, especially within the hedge fund and private equity space. Its well-established financial industry is supplemented by globally-recognised service providers and a diverse pool of skilled talent in banking, tax consultancy, and legal fields. As a major global financial centre, investors can also benefit from Hong Kong’s integrated network of institutions to access a wide range of products and services for their investment or wealth planning needs.
Hong Kong’s attractive business environment is also underpinned by a competitive tax system. In addition to its low corporate tax rate, there is neither investment withholding tax nor a tax on inheritance, capital gains and dividends. For individuals, income tax rates are relatively lower than that of other cities or countries. Investors can also benefit from Hong Kong’s extensive network of Double Taxation Agreements (DTA) to prevent taxation conflicts, thereby promoting investments across jurisdictions with greater certainty.
| Income | Tax Rate |
|---|---|
|
First HK$22 Million |
8.25% |
|
Over HK$22 Million |
16.5% |
No tax on:
| Income Tax |
|---|
|
2% – 17% |
No tax on:
Accessing Mainland China could pose some challenges due to the complexity of its financial markets. However, Hong Kong proves to be a strategic runway to bridge this gap and offer investors unparalleled access to one of the most important economies globally.
The “Pearl of the Orient” is strategically located in the heart of Asia and serves as a unique gateway to Mainland China. Over the last two decades, multiple channels such as the Mutual Recognition of Funds, Stock Connect, and Bond Connect have been developed to promote cross-border investment flow and to open up a realm of investment opportunities for investors.
There is also an ongoing effort to expand Hong Kong’s family office offerings to tap into the tremendous wealth management opportunities in Mainland China. The Greater Bay Area, an integrated economic and business hub scheme linking the two Special Administrative Regions of Hong Kong and Macau with nine municipalities in Mainland China, boasts a GDP of $1.6 trillion (as of 2020) and is poised to continue to prosper and grow. One of the initiatives includes the Wealth Management Connect, a cross-border investment scheme that aims to encourage capital flows within the Greater Bay Area. Hong Kong and Macau residents can access onshore wealth management products distributed by Mainland banks via the Northbound route; while Mainland residents can access offshore offerings by Hong Kong and Macau banks through the Southbound channel.
Access Mainland China investment funds that can be distributed in Hong Kong
Access Shanghai and Shenzhen stocks via Hong Kong
Access Mainland China bonds via Hong Kong
Access wealth management products distributed by Mainland China banks
The development of Hong Kong as a family office hub is of salient significance to the city’s government. This is evident firstly through the establishment of FamilyOfficeHK, a dedicated family office team, by InvestHK (Government Department of Foreign Direct Investment) to promote and expand the family office landscape in Hong Kong. More recently, the government also proposed tax concessions for eligible family management entities managed by single-family offices in the Budget 2022-23. These demonstrate the government’s commitment to building an effective and conducive environment for family offices to flourish in Hong Kong.
In addition, the Limited Partnership Fund Ordinance (LPFO) was launched in 2020 to enhance the city’s competitiveness as a fund management hub and attract institutional funds. This new regime targets private equity and venture capital fund managers looking for a cost-effective LP-GP solution onshore in Hong Kong and is comparable to those of other commonly used fund domicile jurisdictions such as the Cayman Islands and Singapore. LPFs enjoy extensive contractual freedom in respect of the fund operations, allowing partners to tailor terms according to their needs. They are also positioned to reap significant concessional tax benefits, such as exemption from profit tax if the fund satisfies certain conditions under the Unified Funds Exemption (UFE) regime. Furthermore, eligible funds would not have any capital duty and/or stamp duty on proceeds from profit distribution, as well as from any transfer, contribution, or withdrawal to and from the LPF.
As the family office industry continues to see thriving demand, Hong Kong has all the essential ingredients to capitalise on this growth, with its dynamic business environment, established worldclass infrastructure, a competitive tax scheme, and unparalleled access to Mainland China. Shared commitment by the regulators has resulted in supportive initiatives to seize the opportunities emerging from the flourishing Greater Bay Area. With China gaining a more dominant role in the global arena, and its gradual capital market liberalisation underway, wealthy individuals looking to establish their family offices will profit from Hong Kong’s unique role as a conduit between this massive economy and global capital markets
SingAlliance is an independent wealth manager with a presence in Hong Kong, Singapore, Switzerland and Dubai. Our expertise and experience in the family office and wealth management space put us in an ideal position to support you and your family’s needs. SingAlliance’s bespoke and comprehensive wealth solutions can help you navigate the complexities of wealth planning and to bring you greater peace of mind. For further information, please get in touch with us.
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WeDigest > Family Office > Navigating W...
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