A year on from our previous article, “What Does the Future Hold for Family Offices in Hong Kong?”, our fourth instalment in our series in exploring the development and opportunities of family offices in Hong Kong in 2025.
Hong Kong is definitely stepping up its drive forward in attracting more single-family offices (“SFO”), with a renewed promise of new incentives in the 2024-25 budget as proposed by the Chief Executive of Hong Kong. This follows hot on the tails of the increase of tax benefits and other initiatives implemented since 2023 to encourage more private clients to manage their wealth in Hong Kong.
Comparing Hong Kong and Singapore, both cities have implemented specific measures to attract family offices, offering exclusive incentives and advantages that differ from traditional ‘Non-Dom’ regimes and stand out as leading destinations for ultra-high net worth individuals seeking favourable tax regimes and robust business environments.
Recent success and market growth in Hong Kong – what makes Hong Kong stand out?
The momentum behind Hong Kong’s family office sector is evident in recent market data. According to InvestHK, the city has attracted over 50 new family offices in the past year alone, managing combined assets exceeding US$100 billion. Major financial institutions, including HSBC, UBS, and Credit Suisse, have significantly expanded their family office services in Hong Kong, demonstrating strong confidence in the market.
SFOs in Hong Kong can benefit from the city’s territorial tax system, where only income generated within Hong Kong is subject to taxation. Hong Kong does not impose capital gains tax or inheritance tax, further enhancing the appeal of setting up a family office in the region. However, it’s crucial for SFOs to adhere to local regulations and engage with tax advisors to ensure compliance and optimize tax efficiency.
Unlike other jurisdictions, there is no specific licensing regime for family offices, allowing for more straightforward operations without complex regulatory approvals. Application can be made to the Inland Revenue Department for tax concession after the family office is set up.
Hong Kong offers various immigration schemes that provide flexibility for individuals looking to establish residency in the region – this includes the Quality Migrant Admission Scheme, which allows skilled individuals to settle in Hong Kong without a job offer. Moreover, the eligibility criteria of 7 years for obtaining permanent residency in Hong Kong are straightforward compared to other jurisdictions, attracting high-net-worth individuals seeking to establish a presence in Asia with minimal residency requirements.
How do Family Offices in Hong Kong benefit from the 2024-25 Budget?
Family Offices in Hong Kong look forward to development of previously implemented benefits provided by the Government of the HKSAR. As set out in the 2024-25 Budget, the Government have stated three key points:
- Attracting global family offices and asset owners to Hong Kong will help bring in more capital and drive ancillary economic activities. The Government have implemented a number of measures, including providing tax concessions for qualifying transactions of family‑owned investment holding vehicles managed by single family offices in Hong Kong, and streamlining the suitability assessment when dealing with sophisticated professional investors.
- The new Capital Investment Entrant Scheme (new CIES) opened for applications on 1 March 2024. Eligible investors who invest HK$27 million or more in qualifying assets and place HK$3 million into a new CIES Investment Portfolio may apply to reside in and pursue development in Hong Kong. The new CIES will help strengthen Hong Kong’s advantages in developing the asset and wealth management industry and related professional service sectors in Hong Kong, while supporting the I&T sector’s development. Starting from March 2025, investments through an eligible privately held company owned entirely by the applicant will also qualify. InvestHK received more than 5,000 enquiries and over 500 applications as of 13 September 2024.
- The Government are setting the stage for the second Wealth for Good in Hong Kong Summit in end‑March 2025 in a bid to showcase Hong Kong’s unique advantages to global family offices and asset owners. In addition, the Government will further enhance the preferential tax regimes for related funds, single family offices and carried interest, including reviewing the scope of the tax concession regimes, increasing the types of qualifying transactions and enhancing flexibility in handling incidental transactions, all to attract more funds and family offices with potential to establish a presence in Hong Kong.
We are indeed entering into a 2025 filled with opportunities and support from the Government in terms of cementing Hong Kong as a ‘favoured’ family office hub. Hong Kong has created a robust and competitive regulatory environment, and there is strong support from the Government in terms of immigration and tax incentives.
Keeping a close eye on Singapore
As discussed in our series, Singapore has emerged as a leading family office hub in Asia in recent years, in heated competition with Hong Kong. As of 2023, more than 59% of the family offices in Asia are located in Singapore. Singapore has become a favoured destination in the region for establishing family offices due to the ease of doing business, political and economic stability, strategic location and an attractive tax and regulatory regime.
Successful fund tax incentives for family offices in Singapore are articulated in section 13O and section 13U of the Income Tax Act 1947 in Singapore. Section 13O and Section 13U provide exemption on specified income derived from designated investments (“DIs”). The list of DIs covers a wide range of investments. Section 13O and Section 13U also provide a significant GST recovery rate and WHT exemption on interest payments to non-residents. A SFO which manages the funds of one family and the Singapore fund vehicle of the SFO forms part of the same group of companies, the Singapore SFO should automatically benefit from the exemption from holding fund management license.
Singapore has emerged as a competitive family office hub in Asia, primarily due to its stable family office ecosystem. The Monetary Authority of Singapore and the Singapore Economic Development Board jointly established the Family Office Development Team to continue developing Singapore’s competitiveness as a global wealth and family office hub.
However, Singapore imposes a higher corporate tax rate compared to Hong Kong, which may affect the after-tax returns for family offices. Moreover, the cost of living and operating a family office in Singapore can be relatively high, impacting overall operational expenses.
Competition from Dubai
It is hard to ignore the competitiveness of Dubai – Dubai’s financial hub is now home to family offices that control more than US$1 trillion in assets, driven by the influx of high-net worth individuals over the past few years.
Arif, Amiri, the chief executive officer of Dubai International Financial Centre Authority has reaffirmed that “Family businesses contribute significantly to Dubai’s economy. The DIFC is home to over 120 families and 800 family-related structures and entities who manage more than $1.2 trillion in assets”. The United Arab Emirate’s appeal for the ultra-wealthy and their investment companies has grown in recent years primarily due to a favourable tax-regime, low crime rate and a convenient location at the juncture of multiple continents and time zones.
However, some challenges exist for establishing a family office in Dubai, including limited regulatory clarity surrounding family office structures and succession planning. Additionally, the legal framework for wealth management and family governance in Dubai may not be as developed as in other established financial centres, posing potential risks for family offices operating in the region.
Stepping into 2025 – what lies ahead?
The family office landscapes in Hong Kong, Singapore, and Dubai offer a vast array of opportunities and challenges for high-net-worth individuals and families. As these financial hubs continue to evolve, it is anticipated that commercial, employment and tax aspects will continue to be hot topics for family offices going into 2025.
The family office landscape in Hong Kong is entering a golden era of development. The city’s position as China’s international financial centre provides distinct advantages that complement rather than compete with other jurisdictions. Hong Kong’s deep capital markets, sophisticated financial infrastructure, and cultural understanding of Asian family businesses create a unique value proposition that continues to attract ultra-high-net-worth families.
As we move into 2025, Hong Kong’s family office ecosystem continues to strengthen through enhanced Greater Bay Area connectivity, innovation in financial technology, and expansion of green and sustainable investment opportunities. The deepening of professional services capabilities and continued regulatory refinement demonstrate Hong Kong’s commitment to meeting evolving family office needs.
Hong Kong may see a 43% increase in family offices in 2025 thanks to new government measures to entice wealthy individuals to set up shop in the city as stated by Mr. Alpha Lau, director-general of investment promotion at InvestHK, in an interview with local television station Now TV – this reflects not just the success of government initiatives, but also Hong Kong’s enduring strengths as a global financial centre. With its unique position as the gateway to China’s vast opportunities and its comprehensive support for family offices, Hong Kong is well-positioned to remain Asia’s premier family office hub for generations to come.
Our observations
We have witnessed Hong Kong becoming a magnet for the mega-wealthy in the past years, and these are the most common reasons for them to move to Hong Kong:
- The China Factor
Wealthy Western entrepreneurs are looking for a change of scenery, and many are choosing Hong Kong as their new home due to its proximity to China, providing huge business opportunities for their start-up.
- Best of both worlds
Many consider Hong Kong as a vibrant melting pot where East meets West, offering the perfect blend of Asian business connections and Western-style freedoms.
- Living the High-Life
World-class healthcare, top-notch schools, fantastic food scene, and some of the most impressive urban infrastructure anywhere, combined with the proximity between urban jungle and the nature – Hong Kong offers the kind of vibrant lifestyle that makes the ultra-wealthy feel right at home.
Author: Alfred Ip