Hong Kong vs. Singapore: Which Jurisdiction Offers Better Tax Efficiency for Family Offices?

Introduction: The Battle for Asia’s Wealthiest Families

Hong Kong and Singapore have emerged as the two dominant financial hubs competing for ultra-high-net-worth (UHNW) families seeking to establish single family offices (SFOs) in Asia. Both jurisdictions offer compelling advantages through their territorial tax systems, sophisticated financial infrastructure, and strategically designed tax incentive schemes. As of 2024, this competition has intensified, with both cities refining their offerings to attract the world’s wealthiest families.

Singapore currently hosts over 2,000 family offices, having experienced explosive growth from approximately 400 in 2020. Hong Kong, while starting later with its formal tax concession regime launched in May 2023, has leveraged its unique advantages and closer proximity to mainland China to position itself as a formidable alternative. This article provides a comprehensive analysis of both jurisdictions to help families and their advisors make informed decisions about where to establish their family office operations.

Understanding the Tax Frameworks

Hong Kong: The FIHV Regime

Hong Kong’s tax concession regime for family-owned investment holding vehicles (FIHVs) came into operation on May 19, 2023, following the gazettal of the Inland Revenue (Amendment) (Tax Concessions for Family-owned Investment Holding Vehicles) Ordinance 2023. The regime applies retrospectively to years of assessment commencing on or after April 1, 2022.

Key Features of the FIHV Regime:

• 0% Profits Tax Rate: Complete exemption from Hong Kong profits tax on assessable profits arising from qualifying transactions and incidental transactions in specified assets
• No Pre-Approval Required: Unlike Singapore’s schemes, the Hong Kong regime provides automatic qualification once eligibility criteria are met, eliminating lengthy application processes
• Minimum Asset Threshold: HK$240 million aggregate net asset value of specified assets managed by the eligible single family office
• Flexible Structures: Both the FIHV and the single family office can be established in or outside Hong Kong, providing significant structural flexibility
• Broader Family Definition: More inclusive definition of “family” compared to Singapore, allowing for wider beneficial ownership structures
• Entity Flexibility: FIHVs can take the form of companies, trusts, partnerships, or other legal arrangements

The regime covers a comprehensive range of specified assets including securities, funds, foreign exchange contracts, futures contracts, insurance policies, and real estate. Qualifying transactions involve the acquisition, sale, disposal, or holding of these specified assets.

Singapore: The 13O and 13U Schemes

Singapore offers two primary tax incentive schemes for family offices under Sections 13O and 13U of the Income Tax Act 1947. These schemes have been instrumental in establishing Singapore as one of the world’s fastest-growing family office hubs.

Section 13O (Singapore Resident Fund Scheme):

• Applies to funds structured as Singapore-incorporated companies or variable capital companies (VCCs)
• Minimum fund size of S$20 million (approximately US$15 million)
• Enhanced in 2024 to include limited partnerships registered in Singapore
• Exempts from tax the income earned by funds managed by a Singapore-based family office
• Extended until December 31, 2029 following the 2024 Budget announcements

Section 13U (Enhanced-Tier Fund Scheme):

• Minimum fund size of S$50 million (approximately US$37 million)
• Requires at least three investment professionals with significant experience
• Minimum annual business expenditure of S$200,000 in Singapore
• Provides broader designated investment categories
• Includes substantial GST recovery rates and withholding tax exemptions on interest payments to non-residents
• Also extended until December 31, 2029

As of October 2024, all new tax incentive applications must be accompanied by a screening report issued by a Screening Service Provider, adding an additional compliance layer but also enhancing the reputation of Singapore’s family office ecosystem.

Comparative Analysis: Key Differentiators

Corporate Tax Rates

Both jurisdictions operate territorial tax systems, meaning only income sourced within the respective jurisdiction is subject to tax. This fundamental similarity provides a strong foundation for tax planning.

Hong Kong: Operates a two-tier profits tax system. The first HK$2 million of assessable profits are taxed at 8.25%, with profits exceeding this threshold taxed at 16.5%. Only one entity per corporate group can claim the reduced rate. For unincorporated businesses, the rates are 7.5% and 15% respectively.

Singapore: Applies a flat corporate income tax rate of 17%. However, Singapore offers partial tax exemption schemes including the Start-Up Tax Exemption (SUTE), which provides exemptions on the first S$200,000 of chargeable income for qualifying new companies.

Approval Process and Timeline

One of the most significant practical differences between the two jurisdictions lies in the approval process.

Hong Kong: The FIHV regime provides automatic qualification without requiring pre-approval from any regulatory authority. As long as the family office meets the minimum criteria, the tax concessions automatically apply. This represents a substantial administrative advantage, allowing families to obtain tax certainty immediately upon establishing operations.

Singapore: Family offices seeking benefits under Sections 13O or 13U must obtain prior approval from the Monetary Authority of Singapore (MAS). The application process can take up to two years, requiring detailed documentation and ongoing compliance monitoring. While this creates a higher barrier to entry, it also ensures a more regulated and potentially more reputable ecosystem.

Substance Requirements

Both jurisdictions require family offices to demonstrate real economic substance to qualify for tax concessions, though the specific requirements differ significantly.

Hong Kong FIHV Requirements:

• Employment: At least two full-time employees in Hong Kong who can be either Hong Kong residents or non-residents holding valid work visas
• Qualifications: No specific professional qualifications required for employees, providing greater flexibility in hiring
• Operating Expenditure: Minimum HK$2 million (approximately US$256,000) in annual operating expenditure in Hong Kong
• Core Income Generating Activities (CIGAs): Must be carried out in Hong Kong in compliance with international tax standards

Singapore 13O/13U Requirements:

• Investment Professionals (13U): At least three investment professionals, including at least one who is a non-family member and a Singapore tax resident
• Qualifications: Professionals must have significant experience in roles such as trader, research analyst, or portfolio manager
• Operating Expenditure: Tiered spending requirements ranging from S$200,000 (approximately US$150,000) to S$1 million (approximately US$750,000) depending on the scheme and fund size
• Local Investment Requirement: Must invest at least 10% of assets under management or S$10 million (whichever is lower) in qualifying local investments, including Singapore-listed equities and qualifying debt securities

Hong Kong’s requirements are generally considered more straightforward and less onerous, particularly regarding employee qualifications and the absence of a mandatory local investment requirement. However, Singapore’s stricter requirements contribute to a more specialized and potentially higher-quality family office ecosystem.

Definition of Family and Ownership Requirements

Hong Kong: Requires at least 95% of the beneficial interest in both the FIHV and the single family office to be owned by one or more members of a family. The definition of “family” is notably broader than Singapore’s, encompassing direct ancestors and descendants, siblings, spouses, and even philanthropic bodies established by family members. This flexibility allows for more diverse ownership structures including charitable foundations.

Singapore: Also requires substantial family ownership but applies a narrower definition of “family.” The stricter interpretation may pose challenges for families with complex multi-generational structures or those incorporating philanthropic vehicles into their family office arrangements.

Legal Structure Flexibility

Hong Kong: Provides exceptional structural flexibility. Both the FIHV and the single family office can be established in or outside Hong Kong. The FIHV can take the form of a company, trust, partnership, or other legal arrangement. This allows families to maintain existing structures established in other jurisdictions while still benefiting from Hong Kong’s tax concessions.

Singapore: Under Section 13O, the asset holding vehicle must be a fund structured as a company incorporated and resident in Singapore or a Variable Capital Company (VCC). While Singapore’s VCC framework (introduced in 2020) provides significant flexibility with umbrella structures and ring-fenced sub-funds, it requires the vehicle to be Singapore-domiciled, which may necessitate restructuring for families with existing offshore arrangements.

Double Taxation Agreement Networks

Access to comprehensive double taxation agreement (DTA) networks is crucial for families with international investment portfolios.

Hong Kong: Maintains DTAs with approximately 45 jurisdictions, including major economies such as mainland China (through the CEPA arrangement), the United Kingdom, and various European and Asian countries. Hong Kong’s treaties are particularly advantageous for families with significant mainland China exposure.

Singapore: Boasts one of the world’s most extensive DTA networks with over 90 comprehensive agreements. This broader network provides superior tax treaty benefits for families with globally diversified portfolios, particularly those with significant exposure to European and Middle Eastern markets.

Capital Gains and Dividend Treatment

Capital Gains Tax

Both Hong Kong and Singapore share a critical advantage: neither jurisdiction imposes capital gains tax. This fundamental similarity makes both locations extremely attractive for families whose wealth primarily derives from investment appreciation rather than income generation.

In Hong Kong, while there is no capital gains tax, the Inland Revenue Department may characterize frequent trading activities as revenue in nature, potentially subjecting profits to taxation. However, under the FIHV regime, even trading profits from qualifying transactions benefit from the tax exemption, providing certainty for active investment strategies.

Singapore similarly does not impose capital gains tax, though similar principles regarding the distinction between capital gains and trading income apply. The 13O/13U schemes provide clarity by explicitly exempting specified income from designated investments.

Dividend Taxation

Hong Kong: Dividends received from Hong Kong companies are generally not subject to profits tax, as dividends are paid from after-tax profits. Dividends from offshore sources are not taxable under the territorial system unless they are connected to a Hong Kong trade or business.

Singapore: Operates a single-tier corporate tax system where dividends paid by Singapore tax-resident companies are exempt from tax in the hands of shareholders, including individual and corporate shareholders. This applies to VCCs, where dividends distributed to investors are tax-exempt. For dividends from foreign sources, Singapore’s territorial tax system generally provides exemptions, particularly under the foreign-sourced income exemption scheme.

Recent Developments and Future Outlook

Hong Kong: 2024-2025 Enhancements

Hong Kong has demonstrated strong commitment to expanding its family office ecosystem through several recent initiatives:

Capital Investment Entrant Scheme (CIES): Launched on March 1, 2024, the new CIES requires eligible investors to invest HK$27 million or more in qualifying assets and place HK$3 million in a CIES Investment Portfolio to apply for Hong Kong residency. Significantly, effective March 1, 2025, permissible investments held by an FIHV or family-owned special purpose entity (FSPE) managed by an eligible single family office will qualify toward the investment requirement, creating a powerful synergy between residency and tax planning. As of 2024, the scheme received over 800 applications, with 733 verified as meeting net asset requirements and 240 applicants fulfilling permissible investments.

Proposed Regime Enhancements: The Hong Kong Government announced in late 2024 its intention to further enhance preferential tax regimes for funds, single family offices, and carried interest. Planned improvements include reviewing the scope of tax concession regimes, increasing the types of qualifying transactions, and enhancing flexibility in handling incidental transactions. These proposed changes signal Hong Kong’s determination to remain competitive with Singapore.

Singapore: 2024 Refinements and Extensions

Singapore’s February 2024 Budget introduced significant refinements to maintain its leadership position:

Scheme Extensions: The government extended Sections 13O and 13U until December 31, 2029, providing long-term certainty for families considering Singapore. The extension also applies to Section 13D, benefiting a broader range of fund structures.

Enhanced Section 13O: The scheme was expanded to include limited partnerships registered in Singapore, providing additional structural flexibility comparable to other leading jurisdictions.

Revised Economic Criteria: Economic requirements for Sections 13D, 13O, and 13U were refined effective January 1, 2025, to ensure schemes continue meeting their policy objectives while remaining competitive.

Screening Requirements: From October 1, 2024, all new applications must include a screening report from a Screening Service Provider. While adding compliance costs, this measure enhances the integrity and reputation of Singapore’s family office sector.

Philanthropy Tax Incentive: Launched January 1, 2024, this scheme allows family offices approved under Sections 13O or 13U to receive 100% tax deductions for approved donations, capped at 40% of statutory income. This innovative measure supports families seeking to integrate philanthropic activities with their wealth management strategies.

Strategic Considerations for Family Offices

When Hong Kong May Be Preferable

• China-Focused Families: Families with significant business interests or investment exposure in mainland China benefit from Hong Kong’s unique relationship with China, including closer economic integration, currency arrangements, and cultural familiarity
• Immediate Certainty Required: The automatic qualification under the FIHV regime eliminates waiting periods and approval uncertainty, making Hong Kong ideal for families requiring immediate tax planning certainty
• Structural Flexibility Priorities: Families with established offshore structures who wish to maintain these arrangements while accessing tax benefits will find Hong Kong’s flexibility advantageous
• Broader Family Definitions: Multi-generational families or those incorporating philanthropic vehicles may prefer Hong Kong’s more inclusive family definition
• Residency Objectives: Families seeking Hong Kong residency through the CIES can efficiently integrate their FIHV assets into meeting investment requirements
• Lower Operating Costs: The minimum HK$2 million operating expenditure requirement is generally lower than Singapore’s tiered requirements, particularly for smaller family offices

When Singapore May Be Preferable

• Established Ecosystem: With over 2,000 family offices, Singapore offers an unparalleled network of service providers, investment opportunities, and peer families
• Global DTA Access: Families with diversified international portfolios, particularly in Europe and the Middle East, benefit from Singapore’s extensive DTA network
• Professional Infrastructure: Singapore’s mature family office sector provides access to specialized professionals, co-investment opportunities, and sophisticated financial products
• Regulatory Reputation: The MAS approval process, while lengthier, provides regulatory validation that can be valuable for families concerned with reputation and compliance
• VCC Structure Benefits: Families seeking variable capital structures with sub-fund capabilities benefit from Singapore’s innovative VCC framework
• Philanthropic Integration: The dedicated Philanthropy Tax Incentive provides clear benefits for families prioritizing charitable giving
• Political Stability Perception: Some families may perceive Singapore as offering greater political separation from mainland China

Multi-Jurisdictional Strategies

Increasingly, sophisticated families are adopting multi-jurisdictional approaches, establishing presence in both Hong Kong and Singapore to optimize different aspects of their wealth management:

• Geographic Specialization: Using Hong Kong for China-focused investments and Singapore for Southeast Asian and global portfolios
• Functional Separation: Operating trading and active management activities through Hong Kong’s FIHV while maintaining long-term holdings through Singapore’s schemes
• Family Branch Offices: Different family branches establishing offices in each jurisdiction based on residential preferences and regional focus
• Succession Planning: Utilizing different jurisdictions for different generations based on their geographic preferences and business interests

Compliance and Regulatory Considerations

Hong Kong Compliance Framework

Hong Kong’s FIHV regime requires annual compliance verification to maintain tax concessions:

• Annual Certification: The single family office must certify compliance with all conditions for each year of assessment
• Asset Valuation: Annual determination of net asset value to ensure the HK$240 million threshold is maintained (with two-year lookback relief if temporarily falling below)
• Transaction Documentation: Maintaining records demonstrating that transactions qualify as qualifying transactions or incidental transactions
• Substance Documentation: Evidence of employing requisite staff and incurring minimum operating expenditure
• Family Ownership Verification: Annual confirmation that the 95% family ownership requirement is maintained

Singapore Compliance Framework

Singapore’s MAS-regulated schemes involve more extensive ongoing compliance:

• Initial Screening: Screening Service Provider report required for all new applications from October 2024
• Annual Compliance Reports: Detailed reporting to MAS demonstrating continued satisfaction of all scheme conditions
• Investment Professional Verification: Documentation of qualifications and activities of required investment professionals
• Local Investment Tracking: Quarterly or annual verification of the 10% local investment requirement
• Expenditure Documentation: Detailed records of Singapore operating expenditure meeting minimum thresholds
• Fund Manager Licensing: Ensuring the family office maintains appropriate licenses or exemptions under the Securities and Futures Act

Cost Comparison Analysis

Setup Costs

Hong Kong: Generally lower initial establishment costs due to the absence of a formal application process. Costs primarily include entity incorporation (if establishing new structures), professional advisory fees for structuring, and initial employee recruitment. Total setup costs typically range from US$50,000 to US$150,000.

Singapore: Higher initial costs due to the MAS application process, screening requirements, and more complex compliance setup. Total setup costs typically range from US$100,000 to US$250,000, including application fees, screening reports, legal structuring, and compliance framework establishment.

Annual Operating Costs

Hong Kong: Minimum operating expenditure of HK$2 million (US$256,000) is required. Actual costs for a typical family office range from US$300,000 to US$600,000 annually, including salaries for two or more employees, office rental, compliance costs, and professional advisory fees.

Singapore: Minimum expenditure requirements range from S$200,000 to S$1 million depending on scheme and fund size. Actual costs for a typical family office under the 13U scheme range from US$500,000 to US$1.2 million annually, reflecting higher salary requirements for qualified investment professionals, office costs in Singapore’s premium locations, and more extensive compliance obligations.

For larger family offices managing substantial assets, these cost differences become proportionally less significant. However, for families at or near the minimum thresholds, Hong Kong’s lower cost structure provides meaningful advantages.

Conclusion: Making the Strategic Choice

The choice between Hong Kong and Singapore for establishing a family office is not simply a matter of tax rates – both jurisdictions offer zero or near-zero taxation on qualifying investment income. Instead, the decision depends on a complex interplay of factors including:

• Geographic investment focus and exposure to Greater China versus broader Asia and global markets
• Urgency of implementation and tolerance for regulatory approval processes
• Existing legal structures and willingness to restructure
• Family complexity and the need for flexible ownership definitions
• Operating budget and cost sensitivity
• Value placed on ecosystem maturity and peer network
• Residency and lifestyle preferences for family members
• Importance of extensive DTA networks for global portfolios

Hong Kong’s recent entry into formal family office incentives, combined with its unique advantages of automatic qualification, structural flexibility, and China connectivity, has created genuine competition with Singapore’s more established ecosystem. For families focused on Greater China, seeking immediate implementation, or requiring structural flexibility, Hong Kong presents compelling advantages.

Conversely, Singapore’s mature ecosystem, extensive DTA network, and sophisticated professional infrastructure continue to make it the preferred choice for families with global portfolios, those valuing regulatory oversight, or seeking integration into a large community of peer family offices.

As both jurisdictions continue enhancing their offerings in 2025 and beyond, the competitive dynamic benefits UHNW families by providing world-class options tailored to different priorities. Many families may ultimately determine that establishing presence in both jurisdictions optimally serves their complex, multi-generational wealth management needs.