Hong Kong tax reforms may attract more funds, family offices

High-net-worth people are timing large investments to secure tax and visa benefits.

Hong Kong’s planned tax reforms are expected to draw more funds and single-family offices, which are projected to rise from about 2,900 this year to as many as 3,500 by 2028.

Funds and family offices are likely to set up operations once the legislation takes effect next year, Kenny Shui, vice president at Our Hong Kong Foundation, told Hong Kong Business. “There could be regional relocations as family offices choose Hong Kong over Singapore due to better tax clarity and incentives,” added.

The government is amending the tax regime for both sectors to attract more asset managers to base in the city, Hong Kong Chief Executive John Lee said in his 2025 policy address in September. The updated regime broadens the types of funds that can qualify for incentives, including pension and endowment funds, and is likely to draw more hedge and private credit funds.

As of September 2025, the city attracted more than 200 family offices with support from Invest Hong Kong, surpassing the target set in the 2022 policy address, according to a statement by the Financial Services and the Treasury Bureau.

The bureau said the figure excludes family offices set up independently, and follows eight policy measures rolled out in 2023, including tax concessions, the Hong Kong Academy for Wealth Legacy and the New Capital Investment Entrant Scheme.

“Removing the rule that treated bond interest as incidental income will allow credit, virtual-asset and hybrid funds to operate more efficiently,” Shui said in an emailed reply to questions. “Removing HKMA (Hong Kong Money Authority) certification will also simplify applications and reduce compliance costs.”

Under the old rules, if a fund earned interest from bonds, that income was treated as incidental—a category that could disqualify the fund from tax incentives if it exceeded certain limits.

Capital inflows are expected to rise alongside these changes. The Capital Investment Entrant Scheme, which has secured $10.5b in financial-asset commitments, is forecast to grow to $27 billion, said Shin Thant Aung, director at Singapore-based consulting firm YCP Holdings Ltd.

Shui noted that assets under private banking and wealth management linked to family offices had reached $1.5t by end-2024, up 88% from 2017. Net inflows, which fell from 2021 to 2023, rebounded last year. “Net fund inflows for family offices and private trusts in private banking and private wealth management business could stabilise at a high level.”

Aung added that recent market reforms—including lower stamp duty—have boosted trading. “Policy announcements have triggered a rush of applications and capital deployment,” he said in an email. “High-net-worth individuals are timing large investments to secure tax and visa benefits.”

Investment behaviour is also expected to change as funds and families move earlier to secure eligibility. The government’s timeline is prompting investors to accelerate decisions. “Wait and see becomes act-now,” Shui said.

Still, analysts flagged areas needing adjustment. Shui said the 95% de minimis rule might restrict co-investor structures. Smaller funds may also struggle to meet rules requiring two qualified employees and at least $2m in yearly operating spending, almost double Singapore’s threshold.

He added that as eligibility broadens, tax reporting obligations could be viewed as an added administrative burden, particularly when compared with Singapore’s self-administered incentive schemes. “Tax reporting could be no more than what is currently required for funds that manage or hold investments in Hong Kong.”

Meanwhile, measures to improve efficiency could strain liquidity and operational capacity, particularly for smaller brokers and custodians with limited intraday funding, according to Aung. Tighter settlement and reconciliation timelines may also increase costs for global funds.

Aung said Hong Kong should continue refining tax rules, market structure and product depth to stay competitive. “Many families operate a dual-hub model, requiring Hong Kong to perpetually fine-tune tax, market structure, and product depth to stay ahead,” he added.