Hong Kong Dangles Tax Breaks To Woo Family Offices Amidst Stiff Competition From Singapore

HONG KONG – In order to compete with rival financial hub Singapore, where the number of family offices has surged from 50 in 2018 to about 1,500 in 2022, Hong Kong is poised to provide tax concessions that are much easier to obtain, reported the Asian Investor on Thursday morning (16 February, SGT).

In December 2022, a bill was tabled at the Chinese territory’s legislature that would exempt qualified single-family offices from profits tax, as long as the value of their assets surpassed HK$240 million (US$30.6 million).

The measures will be retroactive from 1 April 2022, meaning that it will cover the entire 2022 to 2023 tax year.

“That bill is going through the approval process and is expected to be approved very quickly,” commented Michael Marquardt, CEO for Asia at IQ-EQ, an investor services company that establishes family offices.

“I think that’ll make Hong Kong more competitive than Singapore because the rules will be clear around tax concessions, which is a good thing that I think will push up family office activity in Hong Kong.”

Law firm Dentons Rodyk’s Co-head of the private wealth and family office practices at Singapore, Kia Meng Loh, thinks that Hong Kong’s proposed tax-focused drive to lure family offices back would have significant appeal as it would be more convenient than Singapore’s current procedures for family office when it comes to getting tax exemption.

“For the Monetary Authority of Singapore (MAS), when I’m applying to qualify, I’ve got to say, I’ve got this client, this structure, this is how much they’re going to invest. Can I get approval for tax incentives?”

“Hong Kong’s (proposed) law basically says you don’t have to get preapproval – you just run your family office, and if you fulfil the requirements, just bring in your tax filings. If you qualify, you’ll be given tax exemptions. That’s very practical, very competitive.”

Coupled with the reopening of China and the levelling of the playing field, such as the cost of living, Loh believes that Hong Kong may regain lost ground among Chinese family offices.

“What Hong Kong is doing in terms of tax is very interesting, and I’d be very, very keen to see whether there’s a clawback and some fund flows from Singapore back there — that data point for 2023 will be interesting,” Loh added.