Sign up for tax alert emails GTNU homepage Tax newsroom Email document Print document Download document
December 23, 2022
Hong Kong introduces bill on tax concessions for family-owned investment holding vehicles
The Hong Kong Government introduced the Inland Revenue (Amendment) (Tax concessions for family-owned investment holding vehicles) Bill 2022 (the Bill) on 9 December 2022 regarding a dedicated tax concession regime for family-owned investment holding vehicles (FIHVs) managed by eligible single-family offices (SFOs) in Hong Kong.
As outlined in our earlier Global Tax Alert,1 the proposed tax concession regime will exempt an FIHV and its eligible special purpose entities (SPEs) from profits tax in respect of its taxable profits earned from qualifying transactions carried out or arranged by an eligible SFO in Hong Kong. The provisions in the Bill are substantially consistent with that outlined in the consultation but indeed with several positive enhancements. The Bill is currently under review by the Hong Kong Legislative Council and once passed will take retrospective effect from 1 April 2022.
This Alert summarizes the key provisions of the Bill.
Similar to the existing unified fund exemption regime, an FIHV will be taxed at a 0% concessionary tax rate under the proposed tax concession regime in respect of its assessable profits earned from qualifying transactions carried out or arranged by an SFO in Hong Kong. This includes profits earned incidental to the qualifying transactions, subject to a 5% threshold. The tax concessions will also be provided to eligible SPEs2 owned by an FIHV in proportion to its beneficial interest in such SPEs.
The proposed tax concession regime will take retrospective effect from 1 April 2022. An FIHV can elect for the tax concessions by making an irrevocable election in writing.
Eligibility to the proposed regime
The Bill contains specific anti-avoidance provisions, including anti-round tripping provisions and main purpose test.
Ernst & Young Tax Services Limited, Hong Kong
Ernst & Young LLP (United States), Hong Kong Tax Desk, New York
Ernst & Young LLP (United States), Asia Pacific Business Group, New York
Ernst & Young LLP (United States), Asia Pacific Business Group, Chicago