Hong Kong Has No Estate Tax. But Your Foreign Assets Might.

Because estate planning in 2025 is almost never purely about Hong Kong. Most HK residents have assets in multiple countries — overseas property, foreign investment accounts, foreign pensions — or have family members who are resident in other jurisdictions. Those overseas assets are subject to the estate and inheritance tax rules of the countries where they are situated or where the owner/beneficiary is resident/domiciled. For example, a UK property owned by a Hong Kong resident is within the UK IHT net. A US brokerage account is within the US estate tax net. Japanese assets of a Japanese national are within the Japanese inheritance tax net (up to 55%). The fact that HK has no estate duty does not eliminate these exposures — it simply means the HK assets themselves are protected.

Potentially, yes — UK IHT is based on domicile, not residence. UK Inheritance Tax applies to the worldwide assets of individuals who are UK domiciled (not just UK resident). Domicile is a complex concept, but broadly: if you were born in the UK (domicile of origin), you remain UK domiciled unless you have permanently abandoned all intention of returning to the UK and established a domicile of choice elsewhere. Merely living in Hong Kong for 10 years is not sufficient to establish a domicile of choice if you still have property, a burial plot, family, or intentions of returning to the UK. Additionally, the "deemed domicile" rules mean that a person who has been resident in the UK for 15 of the last 20 tax years is treated as UK domiciled for IHT purposes — and this can still apply for a transitional period after departure. An analysis of your specific facts is essential.

The US estate tax position for non-US citizens (NRAs) owning US-sited assets is surprisingly penal. NRAs are subject to US federal estate tax on US-sited assets (including US real property, stocks in US corporations, and cash in US bank accounts used in a US trade or business) above a very low exemption of US$60,000 — compared to the US$13.6 million exemption available to US citizens (as of 2024). The tax rate is up to 40%. The US also has a gift tax for NRAs on gifts of US-sited property (other than cash). This means a Hong Kong resident owning US$500,000 of US stocks has potential US estate tax exposure of up to US$176,000 on those assets alone. Treaty relief may be available — Hong Kong does not have an estate tax treaty with the US, but the UK does, which may be relevant for UK-domiciled HK residents.

Trusts serve multiple estate planning purposes. In the estate tax context, assets settled into a properly structured trust may be removed from the settlor's taxable estate — particularly important for UK IHT (gifts to most discretionary trusts are potentially exempt transfers if the settlor survives 7 years) and for asset protection purposes. Hong Kong does not tax trust income at the trust level (it depends on where the income arises and where the beneficiaries are resident). Common structures include: (1) Offshore discretionary trusts (often Cayman or BVI) — flexible and widely used for HK families with overseas beneficiaries; (2) UK excluded property trusts — settling non-UK assets before a person acquires UK domicile permanently removes them from the IHT net; (3) Life insurance trusts — policy proceeds pass outside the estate and avoid IHT entirely. Each structure has specific tax conditions that must be carefully maintained.

Hong Kong has no gift tax — gifts between individuals are not subject to stamp duty (unless they involve Hong Kong real property, where stamp duty still applies) and are not treated as income for the recipient. However, the tax position in the recipient's country of residence is an entirely different matter. UK beneficiaries receiving gifts from overseas do not pay UK Income Tax on receipt (gifts are not income), but if the donor is UK domiciled, the gift may still be a potentially exempt transfer for UK IHT purposes. US beneficiaries may need to file IRS Form 3520 to report large foreign gifts. Japanese beneficiaries may be subject to Japanese gift tax. The HK position is clean — it is the overseas jurisdiction that creates complexity.

In our experience, the most common estate planning mistake is assuming that Hong Kong's lack of estate duty means there is no estate planning to do. This leads families to accumulate overseas property, foreign investment accounts, and international family connections over decades — without ever mapping the estate tax exposure those assets create in their countries of origin. By the time the planning is needed (typically at a medical crisis or family emergency), it may be too late to implement the structures that would have been most effective if done years earlier. UK trusts, for example, require the settlor to survive 7 years to obtain full IHT relief. Starting the planning process 10 years too late means the most powerful tools are unavailable.

Hong Kong has very limited treaty coverage for estate and inheritance taxes. Most of Hong Kong's 45+ double taxation agreements are income tax treaties — they do not cover estate or inheritance taxes. There is no comprehensive estate tax treaty between Hong Kong and the UK (though the UK has treaties with some other jurisdictions). This means that for most HK residents with overseas assets, double taxation of those assets is a genuine risk — though it is mitigated in some cases by unilateral foreign tax credit provisions in the relevant countries. For example, the UK allows credit for foreign estate taxes paid on the same assets. Professional advice is essential to navigate these position-specific reliefs.

From a Hong Kong tax perspective, there is no estate duty on the shares of a HK company — so the shares pass to your estate and then to your beneficiaries without any HK tax charge. However: (1) if the company holds overseas assets, those assets may create estate tax exposure in their jurisdiction; (2) if you are UK domiciled, the shares in your HK company are part of your worldwide estate for IHT purposes (even though they are situated in HK, because they are shares in a company rather than real property); (3) the business succession implications — who runs the company, how shares are transferred, whether departing shareholders trigger a buy/sell agreement — require careful pre-planning to avoid operational disruption at the point of death. Business succession planning for HK companies is a specialist area sitting at the intersection of tax, corporate law, and family dynamics.