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Hong Kong sets higher investment threshold for residency

Whilst permanent residency in Hong Kong now requires a minimum outlay of $30m (US$3.83m), the range of permissible investments has been expanded.

Wealthy foreigners seeking residency in Hong Kong will have to invest more in the city than previously set, following the launch of the new Capital Investment Entrant Scheme (CIES).

Under the scheme, high-net-worth individuals must meet the investment and net assets thresholds of $30m (US$3.83m), up from the previous $10m (US$1.28m).

Ross Davidson, a registered foreign lawyer (England and Wales) at Stephenson Harwood, also clarified that applicants must have net assets of not less than $30m (US$3.83) and only assets held by the investor directly throughout the two years preceding the application would qualify.

“This means, under the current rules, all assets held through certain private wealth structures, such as trusts, would not benefit,” Davidson said.

The scheme also requires that at least $3m (US$383,000) of the $30m (US$3.83m) be invested in a specific CIES investment portfolio set up and managed by the Hong Kong Investment Corporation Limited.

To offset higher investment threshold investors must meet, the government expanded the range of permissible investments.

For example, Securities and Future Commission-authorised collective investment schemes, open-ended fund companies, and limited partnership funds, are now included in the scheme. Permissible financial assets under the scheme may be denominated in Hong Kong dollars or Renminbi.

“Such assets must be deposited into a designated investment account,” Davidson said.

The scheme, however, does not recognise residential real estate as a permissible investment.

“For non-residential real estate, only a maximum of HK$10 million (US$1.28m) will count towards the eligibility for the CIES, and such real estate will only include commercial and/or industrial properties,” Davidson said.

Eligibility

To be eligible for the scheme, Davidson said applicants must be aged 18 or above.

Applicants must also be either a foreign national, a Chinese national with permanent resident status in a foreign country, a Macao Special Administrative Region resident or a Chinese resident of Taiwan. 

Davidson said applicants must also apply for a “Net Asset Assessment” by InvestHK to “demonstrate that they have net assets or net equity to which they are absolutely beneficially entitled with a market value of not less than HK$30m (US$3.83m).”

“This requirement is for the two years preceding the date the applicant lodges their application for a Net Asset Assessment,” Davison clarified.

Investment boost

With an expanded list of permissible investment assets, Davidson expects “applicants to make more diverse investments while applying for residency in Hong Kong,” boosting investment fund activity in the city.

“In particular, the scope of eligible collective investment schemes under the category of permissible financial assets is widened to include SFC-authorised funds and real estate investment trusts that are managed by Type 9 licenced entities without any requirements on the underlying investments,” Davidson told Hong Kong Business.

“The scope also includes private open-ended fund companies and limited partnership funds, subject to an aggregate cap of HK$10m on the total investment amount in such private funds.”

Apart from boosting investment activity, Davidson believes the CIES will help Hong Kong attract asset owners and family offices.

“One of the attractions of the CIES is the ability for applicants to apply for permanent residence status in Hong Kong after seven years of continuous residence.  This brings the city on par with immigration schemes available in some other peer jurisdictions, such as Singapore, and its Global Investor Programme,” the expert said.

“Hopefully, the CIES will also lead to more entrepreneurial families and family offices being set up in Hong Kong, boosting Hong Kong’s role as a centre for private wealth,” he added.

Since successful CIES applicants would likely acquire or rent a home in the city, Davidson said the scheme may “stimulate the local real estate market.” This trend is supported by the rollback in all the extra stamp duties previously introduced to cool the property market.

Beyond the real estate sector, the scheme will give a boost to the asset and wealth management industry and its related professional service sectors, asserted Davidson.

“Investors coming to Hong Kong through the CIES will have a wide range of complex needs, which Hong Kong is well placed to serve, such as wealth management, estate planning and trust and corporate services,” he said.
 

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