Hong Kong: The Premier Hub for Family-Owned Investment Holding Vehicles

🇭🇰 Hong Kong: The Premier Hub for Family-Owned Investment Holding Vehicles | Bestar

Hong Kong Family Office Tax Concessions

🇭🇰 Hong Kong: The Premier Hub for Family-Owned Investment Holding Vehicles

Hong Kong has firmly established itself as a leading international finance center and a strategic gateway to Mainland China. For ultra-high-net-worth (UHNW) families seeking sophisticated and tax-efficient structures for wealth preservation and succession, Family-owned Investment Holding Vehicles (FIHVs) managed by Single Family Offices (SFOs) in Hong Kong represent an increasingly attractive solution.

Driven by a new, dedicated tax concession regime, Hong Kong is cementing its status as a top global destination for family wealth management, rivalling other major hubs.

The New Tax Concession: Zero Profits Tax for FIHVs

The primary draw for establishing an FIHV structure in Hong Kong is the Inland Revenue (Amendment) (Tax Concessions for Family-owned Investment Holding Vehicles) Ordinance 2023. This legislation, effective from the year of assessment commencing on or after 1 April 2022, offers a compelling tax benefit:

• A 0% concessionary profits tax rate on assessable profits derived by eligible FIHVs from qualifying transactions and incidental transactions.

  
  

• This exemption also extends to profits derived by Family-owned Special Purpose Entities (FSPEs) set up by the FIHV.

  
  

Key Eligibility Requirements for the FIHV Structure

To qualify for this significant tax concession, both the FIHV and the managing SFO must meet stringent requirements, ensuring genuine substance is established in Hong Kong.

Requirement	Family-owned Investment Holding Vehicle (FIHV)	Eligible Single Family Office (SFO)
Legal Structure	Corporation, Partnership, Trust, or other legal arrangement, established in or outside Hong Kong.	Private company incorporated in or outside Hong Kong.
Primary Purpose	Must be an investment vehicle only, not a business undertaking for general commercial/industrial purposes.	Must provide investment management services to specified family persons (FIHVs, FSPEs, family members).
Ownership	At least 95% beneficial interest held by members of a single family at all times. (Charitable Entity Exception: Can be reduced to 75% if a Section 88 tax-exempt charity holds up to 25%.)	At least 95% beneficial interest held (directly or indirectly) by members of the single family.
Management & Control	Must be normally managed or controlled in Hong Kong.	Central management and control must be exercised in Hong Kong.
Minimum Asset Threshold	Aggregate Net Asset Value (NAV) of Specified Assets (Schedule 16C assets like securities, futures, bonds) under management must be at least HK$240 million (approx. US$30.8 million).	Manages the FIHV and meets the minimum asset threshold for the FIHV.
Substantial Activities	Must carry out Core Income Generating Activities (CIGAs) in Hong Kong and meet: At least 2 full-time qualified employees in Hong Kong. At least HK$2 million annual operating expenditure in Hong Kong.	At least 75% of its assessable profits must be derived from providing services to the family and related entities.

Legal Structures for Family Investment

Beyond the tax concessions, Hong Kong offers robust and flexible legal structures for family investment holding. The choice of structure often depends on the family's specific needs for governance, succession planning, and control.

1. Private Limited Company (Pte Ltd)

• Description: The most common and straightforward structure for an FIHV or an SFO. It is a separate legal entity offering limited liability to shareholders.

  
  

• Advantages: Simple and fast incorporation, flexible share capital requirements (minimum HK$1.00), and a well-understood legal framework.

  
  

• Relevance to FIHV: A Private Limited Company can serve as the FIHV itself, directly holding investment assets, or as the SFO providing management services.

2. Trusts (Discretionary or Fixed)

• Description: A trust is a legal arrangement where a Settlor transfers assets to a Trustee to hold and manage for the benefit of named Beneficiaries (the family members).

  
  

• Advantages: Highly effective for inter-generational wealth transfer, asset protection, and maintaining confidentiality. A discretionary trust offers maximum flexibility for the Trustee to distribute income and capital based on future needs.

  
  

• Relevance to FIHV: A trust is commonly placed at the top of the structure as the ultimate owner, holding the beneficial interest in the FIHV company. The FIHV itself can be a subsidiary of the trust.

3. Limited Partnership Fund (LPF)

• Description: Introduced in 2020, the LPF structure is a dedicated vehicle designed to attract private equity and venture capital funds, and is also suitable for family investment. It consists of a General Partner (GP) and Limited Partners (LPs).

  
  

• Advantages: Tax-transparent at the fund level for qualifying investments, providing operational flexibility and investor-friendly features often sought by professional investors.

  
  

• Relevance to FIHV: While the dedicated FIHV tax concession is a more direct route for many, the LPF offers a strong alternative for families engaged in pooled investment strategies or private market investments, potentially leveraging both regimes.

Broader Advantages of Hong Kong as a Family Office Hub

The favorable tax regime is complemented by Hong Kong's inherent strengths as a global financial center:

• Simple and Low Tax System: Beyond the FIHV concession, Hong Kong maintains a territorial tax system, meaning generally only Hong Kong-sourced income is taxed. There is no Capital Gains Tax, Dividend Withholding Tax, or Estate Duty.

  
  

• Global Connectivity: As a "super-connector," Hong Kong provides unparalleled access to Mainland China's vast opportunities, particularly the burgeoning Greater Bay Area (GBA).

  
  

• Sophisticated Financial Ecosystem: The city boasts a deep pool of experienced wealth management professionals, including private bankers, legal advisors, tax experts, and investment specialists.

  
  

• Robust Legal Framework: Operating under Common Law, Hong Kong's legal and regulatory systems are internationally recognized for their transparency and protection of property rights.

  
  

Process and Timeline for Setting Up an Eligible SFO and FIHV Structure in Hong Kong

Establishing an eligible Single Family Office (SFO) and a Family-owned Investment Holding Vehicle (FIHV) in Hong Kong is a structured, multi-phase process that requires meticulous planning to ensure compliance with the strict tax concession requirements.

Here is a breakdown of the process and an estimated timeline:

Phase 1: Planning and Structuring (4 to 8 Weeks)

This foundational phase involves making critical decisions on governance and legal structure, often requiring close collaboration with Hong Kong legal and tax advisors.

Step	Description	Key Deliverables & Considerations
1. Define Family Governance	Determine the family's long-term vision, mission, and the scope of services the SFO will provide (e.g., investment, philanthropy, concierge).	Family Charter/Constitution: A foundational document outlining family values, investment principles, and conflict resolution mechanisms.
2. Structuring & Tax Advisory	Design the optimal legal structure (e.g., Trust owning FIHV company, which is managed by the SFO company) to meet the 95% family ownership rule and the HK$240 million AUM threshold.	Structure Chart: Finalized corporate/trust structure, confirming compliance with the 0% profits tax conditions.
3. SFO & FIHV Incorporation	Register the Single Family Office (SFO) and the Family-owned Investment Holding Vehicle (FIHV) (often as Private Limited Companies) with the Hong Kong Companies Registry.	Certificate of Incorporation and Business Registration Certificate for both entities (can be completed in 1-2 working days via e-Registry).
4. Premises & Location	Secure suitable office premises in Hong Kong for the SFO. This is essential for meeting the Central Management and Control (CMC) and Substantial Activities requirements.	Office Lease Agreement in Hong Kong.

Phase 2: Operational Setup and Economic Substance (8 to 16 Weeks)

This phase is critical for establishing the required "economic substance" to qualify for the tax concession.

Step	Description	Key Deliverables & Timeline
5. Open Corporate Bank Accounts	Open bank accounts for the SFO and FIHV to handle operations and investment transactions. This is a common bottleneck.	Bank Account Opening: Typically takes 4-8 weeks due to stringent Know-Your-Client (KYC) and due diligence checks.
6. Hiring Qualified Employees	Recruit at least two full-time qualified employees in Hong Kong to carry out the Core Income Generating Activities (CIGAs). Family members can be included if they are qualified.	Employment Contracts and proof of qualifications for the minimum two staff.
7. Implement Operating Systems	Establish necessary accounting, compliance, and investment management systems to track expenditure, transactions, and portfolio performance.	Systems in Place to track annual operating expenditure of at least HK$2 million per year.
8. Immigration (If required)	Apply for employment visas for any non-local staff or family members relocating to Hong Kong.	Visa Approval: Can take 6-12 weeks via the General Employment Policy or the new Capital Investment Entrant Scheme (CIES) if applicable.

Phase 3: Compliance and Commencement (Ongoing)

Once operational, the focus shifts to ongoing compliance and formally claiming the tax benefit.

Step	Description	Key Deliverables & Timeline
9. FIHV Management/CIGAs	The FIHV begins carrying out its investment activities, which are managed by the eligible SFO in Hong Kong. The investment portfolio must meet the HK$240 million AUM threshold.	Investment Policy Statement and Quarterly Performance Reports.
10. Tax Concession Election	The FIHV will elect in writing to apply the tax concession (0% profits tax) in its first annual tax return filing with the Inland Revenue Department (IRD).	Annual Tax Return with the required Self-Declaration Form (Form IR1479). Note: There is no pre-approval process; the concession is claimed via self-assessment.
11. Ongoing Compliance	The SFO and FIHV must continuously satisfy the substance requirements ($2M expenditure, 2 qualified employees, 95% family ownership, $240M AUM) on an ongoing basis to maintain the 0% profits tax rate.	Annual Audit and Filings to demonstrate continuous compliance.

Summary Timeline Estimate

Phase	Estimated Duration	Focus
Phase 1: Planning & Legal	4 – 8 Weeks	Structure design, incorporation, legal advice.
Phase 2: Operational Setup	8 – 16 Weeks	Bank account opening, recruitment, office setup, visa application.
Total Setup (Launch)	3 – 6 Months	Ready to commence substantial investment activities.
Phase 3: Tax Claim	Annually	Self-declaration to the IRD in the tax return.

It is highly recommended that UHNW families engage an experienced Hong Kong legal counsel and tax firm early in the process, as the success of the structure hinges on meeting all the specific conditions of the 2023 Ordinance.

Bestar is the "Goldilocks" Choice

In the competitive landscape of Hong Kong’s family office sector, selecting the right partner for your Family-Owned Investment Holding Vehicle (FIHV) often feels like choosing between extremes.

On one end, you have high-volume corporate service providers; on the other, elite international law firms with high-stakes fee structures. Bestar represents the "Goldilocks" choice: sophisticated enough to navigate the HK$240 million AUM requirements for tax exemptions, yet agile and cost-effective enough for personalized, hands-on management.

The "Goldilocks" Comparison: Hong Kong Family Office Services

Feature	Platform/Tech	Elite Legal	Bestar (The "Goldilocks" Choice)
Core Focus	Software-led data aggregation and tech-stack reporting.	High-end legal, cross-border tax, and dispute resolution.	Integrated accounting, tax, and local compliance (FIHV & SFO).
Service Model	Self-service / Digital platform with limited advisory.	Partner-led, high-specialization legal advisory.	Relationship-led, end-to-end operational management.
Typical Client	Tech-savvy SFOs looking for better data visualization.	Ultra-HNW families with complex global litigation or trust needs.	Established families seeking the 0% FIHV tax concession without "Big Law" overhead.
Local Expertise	Global tech platform; less focus on local HK statutory filing.	Tier 1 international law firm with deep HK/UK tax insights.	Deep Hong Kong "Boots on the Ground" (CPAs & local tax experts).
Cost Structure	Subscription-based (SaaS) or user-based pricing.	High hourly rates/Premium retainers.	Transparent, fixed-fee packages with "one-stop" efficiency.
Regulatory Support	Limited to data security and software compliance.	Strong on SFO/SFC licensing and legal structuring.	Full support for FIHV self-assessment and HKIR compliance.

Why Bestar is the Right Fit for Hong Kong FIHVs

Hong Kong has solidified its status as a premier hub by offering a 0% concessionary tax rate for eligible FIHVs. However, to benefit from this, a family office must meet specific local expenditure and substance requirements.

• Operational Excellence: While Elite Legal excels at drafting the complex trust deeds, Bestar excels at the day-to-day: the bookkeeping, the annual audits, and the HK$2 million minimum operating expenditure tracking that keeps your tax-exempt status safe.

  
  

• The "Human" Touch: Unlike digital-only platforms, we provide a dedicated team of CPAs who understand the nuances of the Hong Kong Inland Revenue Department. We don't just provide a dashboard; we provide the evidence for your self-assessment.

  
  

• Cost-Benefit Mastery: For many families, an international law firm is "too much" for routine holding company maintenance, while a software platform is "too little" to ensure regulatory compliance. Bestar sits right in the middle—providing professional-grade certainty at a sustainable price point.

Q&A: Hong Kong’s FIHV Tax Regime

Hong Kong has solidified its position as the premier jurisdiction for family wealth with its dedicated tax concession regime. By January 2026, the framework has matured, offering a 0% concessionary tax rate for Family-Owned Investment Holding Vehicles (FIHVs) that meet specific "economic substance" requirements.

The following Q&A breaks down the core components of this regime and highlights why a "Goldilocks" partner like Bestar is essential for navigating these requirements compared to high-cost law firms or self-service tech platforms.

Q1: What are the "Minimum Substance" requirements to qualify for the 0% tax rate in 2026?

A: To enjoy the tax exemption, the Hong Kong Inland Revenue Department (IRD) requires that the FIHV demonstrate real economic substance. At a minimum, it must:

• Employment: Employ at least two full-time qualified employees in Hong Kong to carry out the investment activities.

• Expenditure: Incur at least HK$2 million in annual operating expenditure within Hong Kong.

• AUM: Manage a minimum of HK$240 million (approx. US$30 million) in "specified assets" (Schedule 16C assets like shares, bonds, and futures).

Q2: Does the FIHV itself need to be incorporated in Hong Kong? A: No. The FIHV can be a corporation, partnership, or trust established inside or outside Hong Kong. However, it must be normally managed or controlled in Hong Kong. This is where Bestar’s "boots on the ground" approach is vital—we provide the local management presence and documentation to prove that the "mind and management" of the entity resides in the city.

Q3: How does Bestar differ from a "big law" firm in this context? A: Elite firms are excellent for the initial structural design—drafting complex trust deeds or handling multi-jurisdictional legal disputes. However, the 0% tax benefit depends on ongoing operational compliance. Bestar focuses on the execution:

• Audit-Ready Records: We manage the day-to-day bookkeeping and "Substantial Activity" tracking.

• Cost Efficiency: We handle the regulatory filings and local accounting at a fraction of the hourly rates charged by global law firms.

• Integrated Service: We act as your local Corporate Secretary, Accountant, and Tax Representative in one "Goldilocks" package.

Q4: Can digital platforms replace a local service provider? A: While platforms offer beautiful data aggregation and reporting, they are not a compliance solution. Software cannot sign a tax return, represent you in an IRD inquiry, or provide the physical "substance" required by law. Bestar uses modern tech but adds the human accountability needed to ensure your tax-exempt status isn't revoked due to a filing error.

Q5: What are "Qualifying Transactions" under the 2026 guidelines? A: As of the 2025-26 Budget enhancements, the scope of tax-exempt transactions has expanded. It now covers:

• Traditional Assets: Shares, stocks, debentures, and bonds.

• Modern Instruments: Emission derivatives, insurance-linked securities, and certain over-the-counter (OTC) derivative products.

• Incidental Income: Dividends and interest are also exempt, provided they don't exceed 5% of the FIHV's total receipts.

Comparison Matrix: Finding Your "Goldilocks" Fit

Metric	Tech	Elite Law	Bestar (Goldilocks)
Asset Threshold	Tracking only	Legal advice	Compliance management
Local Substance	None	Limited / Advisory	Full (Staff & Office support)
Tax Representation	No	High-level only	Direct IRD Liaison
Pricing Model	Subscription	Premium Hourly	Fixed-Fee Professional

How Bestar Hong Kong Provides Full-Spectrum Support for SFO and FIHV Setup

🇭🇰 Hong Kong: The Premier Hub for Family-Owned Investment Holding Vehicles

Establishing a Single Family Office (SFO) and a compliant Family-owned Investment Holding Vehicle (FIHV) in Hong Kong is a process requiring deep expertise across corporate law, taxation, accounting, and human resources. Bestar Hong Kong, as a professional services firm, is strategically positioned to act as a single point of contact to navigate the complex regulatory landscape and ensure adherence to the strict requirements of the new 0% tax concession regime.

Here is a breakdown of how Bestar Hong Kong can assist UHNW families at every crucial stage of the setup and ongoing compliance journey.

1. Strategic Structuring & Compliance Advisory

Compliance with the Inland Revenue (Amendment) Ordinance is non-negotiable for securing the 0% profits tax rate. Bestar provides front-end advisory to ensure the structure is compliant from Day One.

• Eligibility Assessment: Reviewing the family’s assets, ownership structure, and investment plans against the FIHV eligibility criteria (e.g., the HK$240 million Minimum AUM and the 95% single-family beneficial ownership rule).

  
  

• Optimal Structure Design: Advising on the best legal entities (e.g., Trust, Private Limited Company, Partnership) to be used for the SFO and the FIHV to achieve maximum tax efficiency and meet family governance needs.

  
  

• Regulatory Alignment: Ensuring the SFO structure aligns with any necessary licensing requirements, depending on the scope of investment activities (though SFOs generally qualify for exemptions, professional guidance is critical).

2. Company Formation and Legal Setup

Bestar handles all the administrative and statutory requirements for setting up the legal entities quickly and correctly.

• SFO and FIHV Incorporation: Managing the entire incorporation process with the Companies Registry, including drafting tailored Articles of Association (AoA) to suit the SFO’s and FIHV’s specialized purpose.

  
  

• Company Secretarial Services: Acting as the mandatory Company Secretary for both entities, ensuring the maintenance of statutory records, filing of Annual Returns, and compliance with the Companies Ordinance.

  
  

• Registered Office Address: Providing a statutory Registered Office Address in Hong Kong, a key element in demonstrating local presence.

3. Substantial Activities & Substance Creation

The SFO/FIHV tax concession requires demonstrable Substantial Activities (known as Core Income Generating Activities, or CIGAs) in Hong Kong. This is often the most challenging requirement to meet.

Requirement	How Bestar Hong Kong Assists
Minimum Employees	Assisting with the search and hiring of at least two full-time qualified employees in Hong Kong, including drafting employment contracts and payroll management.
Minimum Expenditure	Implementing accounting systems to ensure the FIHV/SFO incurs and tracks the required HK$2 million Annual Operating Expenditure in Hong Kong.
Central Management	Assisting with Immigration and Visa applications for non-local key personnel (e.g., CEO, CIO), helping them secure the right to work and establish Central Management and Control (CMC) in Hong Kong.
Bank Account Opening	Facilitating the often-complex process of opening corporate bank accounts for the SFO and FIHV, leveraging established relationships with local and international banks.

4. Accounting, Audit, and Tax Compliance

Bestar ensures that the structure remains compliant annually, which is crucial since the tax concession is claimed via self-declaration on the annual tax return.

• Accounting and Bookkeeping: Setting up robust accounting systems to track all transactions, distinguishing between Qualifying Transactions (0% tax) and non-qualifying ones.

  
  

• Statutory Auditing: Providing Audit Support Services to prepare for the mandatory annual audit, ensuring financial statements comply with Hong Kong Financial Reporting Standards (HKFRS).

  
  

• Annual Tax Filing & Concession Claim: Preparing and filing the annual Profits Tax Return with the Inland Revenue Department (IRD), including the necessary Self-Declaration Form to formally claim the 0% tax concession.

  
  

• Tax Planning & Advisory: Advising on ongoing tax implications and adherence to Anti-Round Tripping (ART) rules to prevent the shifting of Hong Kong-sourced taxable income into the FIHV.

By partnering with Bestar, UHNW families can streamline the complex setup process, efficiently establish the required economic substance, and gain the certainty needed to maximize the 0% profits tax benefit offered by Hong Kong's new Family Office regime.

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