Hong Kong’s Tax Benefits for Single-Family Offices vs. Multi-Family Offices

A comprehensive comparison of tax advantages, regulatory requirements, and strategic considerations for family wealth structures in Asia’s premier financial hub

Hong Kong has emerged as one of Asia’s most competitive jurisdictions for family offices, particularly following the introduction of the Family-owned Investment Holding Vehicle (FIHV) tax concession regime in May 2023. This landmark legislation created a clear distinction in tax treatment between single-family offices (SFOs) and multi-family offices (MFOs), fundamentally reshaping the landscape for ultra-high-net-worth families seeking to establish or relocate their wealth management operations to the territory.

Understanding the nuanced differences between SFO and MFO tax treatment is crucial for families, trustees, and advisors evaluating Hong Kong as a jurisdiction for family office establishment. This article provides an expert-level analysis of the comparative tax benefits, regulatory requirements, and strategic implications of each structure.

The FIHV Tax Concession Regime: A Game-Changer for Single-Family Offices

Legislative Framework and Retroactive Application

The Inland Revenue (Amendment) (Tax Concessions for Family-owned Investment Holding Vehicles) Ordinance 2023 was gazetted and came into operation on May 19, 2023. Critically, the tax concessions apply retroactively to any years of assessment commencing on or after April 1, 2022, providing immediate relief to qualifying family office structures that were established in anticipation of the regime.

The FIHV regime represents Hong Kong’s most significant family office tax initiative to date, offering a 0% profits tax rate on assessable profits of qualifying FIHVs derived from qualifying transactions and incidental transactions. This positions Hong Kong competitively against Singapore’s Variable Capital Company (VCC) regime and other Asia-Pacific family office hubs.

Defining the Single-Family Office Structure

Under the FIHV regime, a single-family office is defined by strict ownership and operational parameters. The family office entity itself must have at least 95% of its beneficial interest held by the family (or 75% under specific conditions involving charitable entities), and no less than 75% of its profits must come from providing services to the FIHV and its special purpose vehicles (SPVs).

The “single family” concept encompasses multiple generations of a family, providing flexibility for complex family structures while maintaining the core principle that the office serves one family lineage exclusively. This distinction is fundamental to understanding why SFOs receive preferential treatment compared to MFOs.

Core Eligibility Requirements for FIHV Tax Benefits

To qualify for the 0% tax rate under the FIHV regime, family offices must satisfy several interconnected requirements:

1. Ownership Structure

One or more members of the family must have at least 95% of the beneficial interest (whether direct or indirect) in the FIHV at all times during the basis period for the year of assessment. This ensures the investment vehicle remains genuinely family-owned and prevents dilution by external investors that would transform it into a multi-family or commercial structure.

2. Management and Control Requirements

The FIHV must be “normally managed or controlled” in Hong Kong during the basis period. Notably, the final legislation softened the initial draft requirement for “central management and control” to the more flexible “normally managed or controlled” standard, acknowledging the global nature of family office operations while ensuring substantial Hong Kong presence.

3. Minimum Asset Threshold

The total value of assets managed by the eligible SFO in Hong Kong for the single family must reach HK$240 million. This substantial threshold ensures the regime targets genuinely significant family wealth while remaining accessible to a broad range of ultra-high-net-worth families. Assets are valued according to Schedule 16C of the Inland Revenue Ordinance, covering most typical financial assets including securities, funds, deposits, and other investment vehicles.

4. Substantial Activities Requirement

The FIHV must demonstrate genuine economic substance in Hong Kong through two quantitative tests:

• Employment Test: At least two full-time employees in Hong Kong who possess the necessary qualifications to carry out the core income-generating activities (CIGAs) of the FIHV
• Expenditure Test: At least HK$2 million in operating expenditure incurred in Hong Kong annually, which can include employee salaries, office rent, professional fees, and other operational costs

These substance requirements align with international best practices and OECD guidance on preventing base erosion and profit shifting (BEPS), ensuring Hong Kong’s regime maintains credibility with global tax authorities.

Qualifying Transactions and Income

The FIHV regime provides tax exemption for profits derived from “qualifying transactions” in specified assets, which include:

• Securities traded on recognized stock exchanges
• Interests in private companies and partnerships (subject to specific tests)
• Foreign exchange contracts and other derivatives
• Deposits with authorized financial institutions
• Certificates of deposit and similar instruments
• Units in collective investment schemes

Incidental income arising from holding qualified assets, such as interest from bonds or dividends, can also be exempted from profits tax, subject to a de minimis threshold of 5% of total income. This ensures that ancillary income streams do not jeopardize the overall tax exemption.

2024-2025 Enhancements: Expanding the Scope

In the 2025-26 Budget, the Hong Kong Government announced significant enhancements to the FIHV regime to keep pace with evolving investment strategies. Following a consultation paper issued in November 2024 (with responses closed January 3, 2025), proposed expansions include:

• Virtual Assets: Cryptocurrency, tokens, and digital assets meeting specified criteria
• Private Credit and Direct Lending: Loans to corporates and structured credit investments
• Emission Derivatives and Allowances: Carbon credits and related environmental instruments
• Insurance-Linked Securities: Catastrophe bonds and similar risk transfer instruments
• Non-Corporate Private Entities: Interests in partnerships and other alternative structures

These enhancements reflect the sophisticated investment strategies employed by modern family offices and ensure Hong Kong’s regime remains competitive with international alternatives.

Multi-Family Offices: Tax Treatment and Strategic Alternatives

The FIHV Exclusion for MFOs

The current FIHV preferential tax regime explicitly does not cover investment holding vehicles managed by multi-family offices. This exclusion reflects several policy considerations articulated by the Hong Kong Government:

Commercial Nature: MFOs that provide investment management services or other financial services to multiple unrelated families operate businesses essentially no different from banks, private banks, and wealth and asset management companies. Extending the FIHV exemption to commercial service providers would create competitive distortions in the financial services sector.

Compliance Complexity: When FIHVs of different families are managed by multi-family offices, there are practical difficulties in ascertaining whether the minimum asset threshold and substantial activities requirements of each FIHV are met. Segregating assets, expenses, and employees among multiple family mandates creates administrative challenges that could undermine the regime’s integrity.

Fiscal Implications: The Government has stated it needs to critically examine the actual effectiveness and related fiscal implications of further extending tax incentives to multi-family offices before considering any expansion of the regime.

Alternative Tax Benefits for MFOs: The Unified Fund Exemption

While excluded from the FIHV regime, multi-family offices and their client vehicles are not without tax benefits in Hong Kong. The Unified Fund Exemption (UFE) regime provides an alternative pathway to tax exemption for qualifying investment vehicles.

Where an FIHV meets the definition of “fund” under the Inland Revenue Ordinance and the qualifying transactions are carried out or arranged in Hong Kong by a licensed corporation of the Securities and Futures Commission (which may include multi-family offices holding appropriate licenses), the relevant transactions are already eligible for tax exemption under the unified tax regime for funds.

The UFE regime requires:

• The fund must be a non-resident or resident person (with specific structural requirements)
• Transactions in qualifying assets must be carried out or arranged by a licensed corporation in Hong Kong
• The fund must meet portfolio diversification requirements or qualify under specific exemptions
• Certain “specified persons” cannot hold more than 30% of the fund (anti-avoidance rule)

Notably, the November 2024 consultation paper proposed harmonized enhancements to both the FIHV and UFE regimes, including expanded qualifying assets. This suggests the Government recognizes the need to provide competitive tax treatment across different family office structures while maintaining appropriate distinctions.

Regulatory and Licensing Distinctions

Beyond tax treatment, a fundamental difference between SFOs and MFOs lies in regulatory requirements. Multi-family offices serving multiple unrelated families generally cannot benefit from the regulatory exemptions available to SFOs and typically require appropriate Securities and Futures Commission (SFC) licensing.

An MFO providing regulated services in Hong Kong—such as advising on securities, asset management, or dealing in securities—will require Type 4, Type 9, or other relevant licenses depending on the services provided. This adds compliance costs, regulatory oversight, and operational complexity compared to SFOs, which generally operate without financial licensing when serving only their family.

The licensing requirement for MFOs, however, facilitates access to the UFE regime, as licensed corporations can carry out or arrange qualifying transactions for fund clients, thereby enabling tax exemption even without FIHV benefits.

Comparative Analysis: SFO vs. MFO Tax Advantages

Tax Rate Comparison

Structural Flexibility and Offshore Entities

An important advantage shared by both SFO and MFO structures is that there is no requirement under Hong Kong tax law for the family trust, family office entity, or FIHV to be Hong Kong-incorporated entities. Offshore trusts and companies formed in the British Virgin Islands, Cayman Islands, Bermuda, or other jurisdictions may be utilized, provided the management and control requirements and substantial activities tests are satisfied in Hong Kong.

This flexibility allows families to optimize their global tax position, maintain existing trust structures, and benefit from Hong Kong’s tax concessions without requiring wholesale restructuring of legacy wealth arrangements.

SPE and FSPE Extensions

Both SFO and qualifying fund structures can extend tax benefits through special purpose entities (SPEs) or family-owned special purpose entities (FSPEs). Under the FIHV regime, the tax exemption can be extended to SPVs in proportion to the shareholding percentage that the FIHV has in that SPV. For example, if the FIHV owns 50% of an SPV’s shares, 50% of investment profits from specified assets derived by that SPV will also be tax-exempt in Hong Kong.

This proportional approach provides flexibility for joint ventures, co-investments, and complex deal structures while maintaining the integrity of the tax exemption.

Hong Kong’s Broader Tax Advantages for Family Offices

Territorial Tax System and Foreign-Sourced Income

Beyond the FIHV and UFE regimes, Hong Kong’s fundamental tax architecture provides significant advantages for both SFOs and MFOs. Hong Kong applies a pure territorial basis of taxation, where only income that arises in or is derived from Hong Kong is subject to profits tax. Foreign-sourced income, including dividends, capital gains, interest, and royalties, is fully exempt, provided it is not deemed to have a Hong Kong source through local value-creation or anti-avoidance rules.

This territorial system is particularly advantageous for family offices managing global investment portfolios, as passive foreign-sourced investment income can often escape Hong Kong taxation entirely, independent of the FIHV or UFE regimes.

No Capital Gains Tax, Dividend Tax, or Estate Tax

Hong Kong does not impose:

• Capital Gains Tax: Appreciation in investment values is not taxable (unless trading constitutes a business)
• Dividend Tax: Dividend income is generally not taxable in Hong Kong
• Estate Tax: No inheritance or estate duties since abolition in 2006
• Withholding Tax: No withholding tax on dividends or interest paid to foreign entities

These structural tax absences create a highly favorable environment for intergenerational wealth preservation and transfer, benefiting family offices of all types.

Integration with the New Capital Investment Entrant Scheme

In March 2024, Hong Kong launched the New Capital Investment Entrant Scheme (CIES) to attract high-net-worth individuals and business elites to relocate by making capital investments. In the first year, the scheme received over 800 applications, with 733 verified as meeting the net asset requirement and 240 having fulfilled the permissible investments.

Effective March 1, 2025, critical enhancements integrate the FIHV regime with the CIES. Permissible investments held by a family-owned investment holding vehicle or family-owned special purpose entity under an FIHV will be counted toward an applicant’s investment quota, provided the structure is managed by an eligible single-family office meeting the HK$240 million threshold and HK$2 million expenditure requirement.

This integration allows ultra-high-net-worth families to obtain Hong Kong residency through their FIHV investments while simultaneously benefiting from the tax exemptions, creating a powerful combined incentive for family office relocation.

Strategic Considerations and Decision Framework

When to Choose an SFO Structure

A single-family office structure optimized under the FIHV regime is advantageous when:

• Family assets exceed the HK$240 million threshold
• The family prefers exclusive control over investment strategy and operations
• Confidentiality and privacy are paramount concerns
• The family can meet substantial activities requirements economically
• Investment strategy focuses on qualifying assets eligible for FIHV exemption
• The family seeks maximum tax efficiency with 0% rate on qualifying income
• Regulatory simplicity is valued (avoiding SFC licensing complexity)

When to Consider an MFO Structure

A multi-family office or commercially-oriented structure may be preferable when:

• Multiple unrelated families wish to share infrastructure and expertise
• Economies of scale in professional staffing and systems are important
• The family office wishes to monetize its expertise by serving external clients
• Individual family assets are below the HK$240 million FIHV threshold but collective assets justify sophisticated infrastructure
• Access to institutional-grade investment opportunities requiring larger pool
• Succession planning involves potential transition to external client services

MFO clients can still achieve tax efficiency through the Unified Fund Exemption regime, though with additional compliance requirements.

Hybrid Approaches and Structural Evolution

Some families adopt hybrid approaches, maintaining a core SFO structure for the founding family’s assets (qualifying for FIHV benefits) while establishing separate MFO operations to serve aligned families or monetize expertise. This requires careful legal segregation to preserve FIHV eligibility for the family’s own investment vehicles.

Additionally, families may evolve from SFO to MFO structures over time as circumstances change, or vice versa, requiring ongoing strategic tax planning to optimize across different phases of family office development.

Practical Compliance and Administration

No Pre-Approval Process

A significant administrative advantage of the FIHV regime is that there is no pre-approval process or application requirement for family offices to benefit from the tax concessions. Families self-assess eligibility and claim exemptions in their tax returns, subject to potential Inland Revenue Department review.

This approach reduces administrative burden compared to regimes requiring advance rulings or formal applications, though it places responsibility on families and advisors to ensure compliance.

IRD Guidance and Advance Rulings

In February 2024, the Inland Revenue Department announced Advance Ruling Case No. 73, accompanied by updated guidance on tax concessions for family-owned investment holding vehicles. This announcement marked a pivotal moment for SFOs, providing practical clarity on the IRD’s interpretation of key requirements.

Families with complex structures or novel fact patterns can request advance rulings from the IRD to obtain certainty on tax treatment before implementing strategies, though this is optional rather than mandatory.

Investment Qualification Tests

Understanding the various tests applicable to private company investments is critical for compliance:

Immovable Property Test: If an FIHV or FSPE invests in a private company that holds more than 10% of its assets in immovable property (excluding infrastructure) in Hong Kong, the FIHV or FSPE fails this test and will be taxed on profits arising from such investment. This prevents families from using the FIHV regime to shelter Hong Kong real estate investments.

Holding Period Test: If the immovable property test is satisfied but the investment in the private company has been held for less than two years, the FIHV or FSPE must also satisfy both the control test (not controlling more than 50% of the investee company) and the short-term asset test (the investee’s short-term assets don’t exceed 50% of total assets) to maintain tax exemption.

These tests require ongoing monitoring of portfolio companies’ asset compositions and holding periods, adding compliance complexity for families with private equity and venture capital investments.

Conclusion: Strategic Tax Planning in Hong Kong’s Family Office Landscape

Hong Kong’s differentiated tax treatment of single-family offices versus multi-family offices reflects a deliberate policy choice to provide maximum tax benefits to genuine family wealth management structures while maintaining appropriate distinctions for commercial service providers. The FIHV regime’s 0% tax rate for qualifying SFOs positions Hong Kong as one of the most tax-competitive family office jurisdictions globally, particularly when combined with the territory’s absence of capital gains tax, dividend tax, and estate duties.

For families meeting the HK$240 million threshold and able to satisfy substantial activities requirements, the SFO structure under the FIHV regime offers unparalleled tax efficiency and regulatory simplicity. The 2025 enhancements expanding qualifying assets to include virtual assets, private credit, and emission derivatives ensure the regime remains relevant as family office investment strategies evolve.

Multi-family offices, while excluded from the FIHV regime, can still achieve tax efficiency through the Unified Fund Exemption regime, albeit with additional licensing and structural requirements. The choice between SFO and MFO structures ultimately depends on family assets, preferences for control and privacy, willingness to meet economic substance requirements, and long-term strategic objectives.

As Hong Kong continues to refine its family office framework—evidenced by the November 2024 consultation paper and integration with the New Capital Investment Entrant Scheme—families and advisors should maintain ongoing engagement with regulatory developments to optimize tax positions and ensure continued compliance.

The strategic use of offshore entities, careful structuring of SPEs and FSPEs, and integration of tax planning with immigration objectives through the CIES demonstrate that successful family office establishment in Hong Kong requires sophisticated, multi-disciplinary expertise spanning tax, regulatory, trust, and investment advisory domains.