Hong Kong’s rapid development into an international base for global family office continues to meet the evolving needs and demands of this important and growing sector. Understanding Hong Kong’s competitive position and capabilities as a financial center and its vibrant culture along with family offices’ development in both investment and philanthropy opens many opportunities provides a foundation for a world class ecosystem.
Government support
Establishing Hong Kong as a leading center for family office management and activities represents a high priority for the government. In his 2022 policy address, the Chief Executive fixed a target of facilitating no less than 200 family offices to set up or expand their operations in Hong Kong by end-2025. Attracting the number and variety of family offices and ultra-high net individuals will advance the city’s socio-economic and financial development.
The government’s commitment to cultivating a conducive and attractive environment for global family offices is demonstrated through a series of recent set of policy measures issued in March 2023 by the Financial Services and Treasury Bureau.
The diversified and sophisticated needs of these ultra-high-net worth investors will benefit and be supported by the future growth of Hong Kong's financial and professional services, innovation and technology, green and sustainability agendas, arts and culture, as well as philanthropic sectors. Hong Kong is well positioned as a hub and gateway to the Greater Bay Area, China North and Southeast Asia. It is already one of Asia's main asset and wealth management hubs, with asset under management at the end of 2021 worth USD 4.6 trillion. Family offices will play an increasingly important role in the further development of Hong Kong’s wealth management industry. Hong Kong is also home to Chinese family offices representing some of the top ranked billionaires in the world. A full array of wealth management, custodial and administrative businesses are already well established.
A new Capital Investment Entrant Scheme("CIES")
The Financial Secretary announced in his 2023-24 Budget new policies and measures to attract asset owners to deploy and manage their wealth through Hong Kong’s investment opportunities. Besides incentives to entice family offices to relocate the other part of the Hong Kong investment journey is experiencing its rich history and distinct energy as a sophisticated metropolis.
The investment threshold for the original scheme is to be multiplied. And the permissible assets for the scheme will be expanded to include equities listed in Hong Kong; debts issued or fully guaranteed by companies listed in Hong Kong, by the Government, or by other corporations, agencies or bodies wholly three or partly owned by the Government; subordinated debts issued by authorized institutions; and eligible collective investment schemes (including investment-linked assurance scheme (“ILAS”)). Besides assets denominated in Hong Kong dollar, assets denominated in RMB will also be considered.
The government will also explore, apart from financial assets, new asset categories benefitting the long-term development of Hong Kong. Upon approval, applicants may reside and pursue development in Hong Kong along with his/her spouse and dependent unmarried children. Details of the Scheme will be announced at a later time.
Tax Concessions
Legislative amendments have been introduced to provide profits tax exemption for family-owned investment holding vehicles (“FIHVs”) managed by single family offices in Hong Kong. Qualifying transactions include investments in securities, futures contracts, foreign exchange contracts, deposits, exchange-traded commodities, OTC derivative products, and investment in private companies. The tax concession arrangements will be applicable to any years of assessment commencing on or after 1 April 2022 subject to the Legislative Council’s passage.
The Government will review the existing preferential tax regimes for funds and carried interest to create a more efficient tax environment for the asset and wealth management industry and create advantages as an international asset and wealth management centre.
Catalyzing and facilitating regulations for the family office market
Hong Kong’s Securities and Futures Commission will facilitate and address specific issues pertinent to family office licensing requirements and enquiries through reference guides to answer frequently asked questions. It has also set up a dedicated communication channel maintained by its licensing team for family office-related enquiries both by e-mail or voice.
Regulators will continue to work closely with the wealth management industry on evolving family office regulations. Investor protection will be specifically enhanced with a set of more risk-based measures to streamline intermediaries’ suitability assessments and disclosure processes for sophisticated or ultra-high-net worth individual clients.
Establishing the Hong Kong Academy for Wealth Legacy
The Government is also committed to cultivating a deep talent pool for the family office sector in Hong Kong. Education and support should include ongoing training, knowledge exchange and networking sessions. The Government will fund the setup of a new “Hong Kong Academy for Wealth Legacy” to meet the education requirements for both industry practitioners and next-generation wealth owners and managers.
The academy will be housed under the Financial Services Development Council, and be supported by partnerships with the industry, professional service providers, universities, and a dedicated FamilyOfficeHK team under InvestHK.
Besides offering training in relation to traditional wealth management themes, the academy will also teach topics around arts and culture, green and sustainable investments, and philanthropy. The academy will develop partnerships with global peer organizations, building a network to achieve synergies and delivering value to our wealth management sector.
Establishment of a fine art storage and management facilities at Hong Kong International Airport
Hong Kong is an exciting and diverse city that offers a rich and varied art and culture scene. New museums, including the M+ museum for contemporary art and the Hong Kong Palace Museum for Chinese art, along with other existing and upcoming cultural venues, have solidified and strengthened the city’s position as an art and culture hub. Hong Kong is also one of the world’s largest art markets by auction sales with a leading position in Asia. In 2021, the total trade value of artworks, collectors’ pieces and antiques in Hong Kong has exceeded over HKD66 billion. Hong Kong has emerged as a leading global art auction and trading hub.
The Hong Kong Government is developing its art auction and trading market by enhancing its infrastructure. The Airport Authority of Hong Kong is actively studying the establishment of storage, display and appreciation facilities for art and treasures at Hong Kong International Airport, as part of the Airport City development.
As an important global aviation hub, our airport has a network of air routes connecting all over the world. It also efficiently connects with other cities in the Greater Bay Area. The high-security and comfortable environment, combined with the ability of our airport to handle various special cargo safely and efficiently, will be able to provide quality services to local, Mainland and international art collectors and connoisseurs. Global family offices with investments in art will increasingly benefit the city’s support for its art ecosystem.
Developing Hong Kong into a centre for philanthropy
Hong Kong’s financial services sector can play a vital role in supporting and enhancing the philanthropic sector in our city. Financial services can provide tools and platforms for philanthropists to manage and grow their wealth, as well as channel their resources to the most effective and impactful social initiatives. From an advisory perspective, financial institutions can assist in due diligence, monitoring, evaluation and reporting on the outcomes of grants. Hong Kong firms can provide legal advice and structures required for charitable entities to achieve proper governance and continuity. The developing green and social investments sectors in Hong Kong will provide philanthropists with the financial and intellectual tools needed to achieve both financial and social returns.
The Government also plans to enhance the processing of applications for recognition of tax exemption status of charities. The Inland Revenue Department (IRD) will devise a standard form containing a checklist and essential questions to facilitate the submission of applications and streamline processing. Moreover, the IRD will provide further guidance for applicants in drafting their governing instrument and facilitating the precise statement of charitable objects. The number of charities recognized as exempt from tax in Hong Kong exceeded 9,700 and the amounts of approved charitable donations allowed under profits tax (for business donors) and salaries tax (for individual donors) were HKD4.35 billion and HKD7.45 billion respectively in the years 2020 and 2021. Hong Kong has the potential to develop into a philanthropic centre, serving as a base for global family offices and philanthropists to deploy charitable capital.
Expanding the role of FamilyOfficeHK within InvestHK
The Financial Secretary announced in his 2023-24 Budget that HKD100 million will be allocated to InvestHK over the next three years to fund the attraction of more family offices to Hong Kong. The dedicated FamilyOfficeHK team will expand its role and enhance its offerings as a one-stop and customized services team.
The FamilyOfficeHK team will also provide specific services to facilitate philanthropic initiatives conducted by wealth owners with their existing and future presence in Hong Kong. The team will assist in communication and coordination with Government bureaus and departments, and forging partnerships.
Launching a Network of Family Office Service Providers
Partnerships with service providers in the family office sector are important for the promotion and development of new business opportunities and establishing the industry. FamilyOfficeHK team, under InvestHK, will develop and launch a new “Network of Family Office Service Providers”, including private banks, accounting and legal firms, trusts and other professional services firms, which provide comprehensive services to family offices. The network will provide a two-way channel for the Government to brief the industry on the latest policy developments, and to seek advice and assistance on mobilizing the industry’s global network to advocate and promote opportunities in Hong Kong for family offices.
This and future articles will comprise a regular series of features, views and news that will explore the evolving landscape and advantages that Hong Kong offers for family offices.