In the high-stakes arena of global wealth management, where should an ultra-high-net-worth family plant its flag? While Singapore, Switzerland, and London offer compelling narratives, Hong Kong presents a uniquely powerful proposition: a world-class, onshore financial hub with a deliberately simple and favourable tax system. For family offices looking towards Asia’s future, understanding Hong Kong’s specific tax benefits isn’t just about compliance—it’s a strategic imperative for generational wealth.

The Foundational Advantage: Hong Kong’s Territorial Tax System

At its core, Hong Kong’s appeal lies in its territorial source principle of taxation. Unlike jurisdictions that tax residents on their worldwide income, Hong Kong’s Inland Revenue Ordinance (IRO) only imposes tax on profits arising in or derived from Hong Kong. For a family office managing a global portfolio, this is transformative.

What Hong Kong Does Not Tax: The Key Exemptions

This territorial principle translates into clear, legislated exemptions that are tailor-made for investment management:

• Capital Gains Tax: None. Profits from the disposal of capital assets (like securities or property held as investments) are not subject to tax.
• Dividend Tax: None. Dividends received from both local and foreign companies are not taxed, and there is no withholding tax on dividends paid by Hong Kong companies.
• Withholding Tax on Interest: None for offshore interest. Interest received from deposits placed outside Hong Kong is not taxable. Interest sourced in Hong Kong may be taxable, but numerous exemptions exist under the IRO.
• Estate Duty / Inheritance Tax: Abolished since 2006.
• Sales Tax / VAT / GST: None.

The Game Changer: The Family Investment Holding Vehicle (FIHV) Regime

Recognizing the specific needs of family offices, Hong Kong enacted the dedicated FIHV regime. This isn’t just a tax concession; it’s a clear regulatory pathway designed to attract and accommodate family wealth.

An eligible FIHV can enjoy a 0% profits tax rate on all its qualifying transactions, which include gains from the sale of assets and income from securities. To qualify, the vehicle must meet specific conditions designed to ensure substance and commitment to Hong Kong:

• It must be centrally managed and controlled in Hong Kong.
• It must employ at least two full-time, qualified employees in Hong Kong to carry out its investment activities.
• It must incur annual operating expenditure in Hong Kong of at least HK$2.4 million.
• It must have at least HK$240 million in assets under management (AUM) at the end of its first year of election and subsequently.

Navigating Modern Compliance: FSIE and Global Minimum Tax

Hong Kong’s system is sophisticated and aligns with international standards. Family offices must be aware of two critical, modern frameworks:

1. The Foreign-Sourced Income Exemption (FSIE) Regime

Expanded in January 2024, the FSIE regime affects certain types of passive income received in Hong Kong. For family offices, the most relevant are foreign-sourced dividends and interest. To claim an exemption for this income, the receiving entity must satisfy the “economic substance requirement” in Hong Kong. This generally means having an adequate level of employees, operating expenditures, and premises in Hong Kong to manage and hold the assets generating the income. This aligns perfectly with the substance requirements of the FIHV regime.

2. Global Minimum Tax (Pillar Two)

Hong Kong has enacted legislation for the OECD’s Global Minimum Tax, effective 1 January 2025. It applies to large multinational enterprise (MNE) groups with consolidated revenue of €750 million or more. While many single-family offices may fall below this threshold, families with extensive global operating businesses should be aware. The rules include a Hong Kong Minimum Top-up Tax (HKMTT) at 15%, ensuring that if the group’s effective tax rate in Hong Kong is below 15%, a top-up tax is paid locally rather than to another jurisdiction.

Hong Kong vs. Singapore: A Side-by-Side Look for Family Offices

Hong Kong’s edge lies in the statutory clarity of its exemptions, its unparalleled role as a gateway to Mainland China, and a common law system familiar to global investors.

For global families, Hong Kong represents more than a low-tax jurisdiction; it is a strategic, onshore platform for intergenerational wealth management in Asia. Its combination of clear tax exemptions, a dedicated family office regime, and deep capital markets creates a compelling proposition. The families that will thrive are those who leverage Hong Kong not as a passive shelter, but as an active, substantive base for their future in the world’s most dynamic economic region.