At PKF Hong Kong, we offer top-notch tax advisory services to high-net-worth families, single family offices (“SFOs”), and family investment platforms. Our tax specialists assist clients in navigating and complying with the requirements for structuring, elections, advance rulings, and ongoing compliance under Hong Kong’s Family Office Profits Tax Concession for:

• Eligible Family-owned Investment Holding Vehicles; and
• Family-owned Special Purpose Entities.

In the context of the ongoing evolution of global tax transparency and regulation, Hong Kong remains an ideal choice for wealth planning. The region boasts a robust legal system, a clear and straightforward tax framework, and a rich pool of professional talent, all supported by proactive government assistance that fosters a thriving financial environment. This collaborative atmosphere ensures that Hong Kong stands out as a key hub for supporting and protecting family wealth, playing a crucial role in family wealth planning and succession.

1.  What is the Hong Kong Family Office Tax Concession?

The Inland Revenue (Amendment) (Tax Concessions for Family-owned Investment Holding Vehicles) Ordinance 2023 came into effect on 19 May 2023, amending the Inland Revenue Ordinance (Cap. 112) to provide a 0% profits tax rate on the assessable profits arising from: 

• Eligible Family-owned Investment Holding Vehicles (“FIHV”) managed by eligible SFOs through qualifying transactions and incidental transactions; and
• Profits earned by Family-owned Special Purpose Entities (“FSPE”) based on the beneficial ownership ratio of FIHVs in the FSPEs.

The above tax concession applies to years of assessment commencing on or after 1 April 2022.

2.  Why Families Choose Hong Kong?

Key advantages:

• 0% profits tax on qualifying income under the regime (where conditions are met);
• Hong Kong generally has no value-added tax or goods and services tax, no capital gains tax, and typically does not impose withholding tax on dividends and interest;
• Flexible structure: An FIHV can be established in Hong Kong or overseas (but must comply with Hong Kong requirements, such as management/control and substantial operations);
• Simplified application process: This can be done by submitting an irrevocable written election to the Inland Revenue Department (“IRD”) (no need to reapply each year);
• Mature ecosystem: Hong Kong has a complete ecosystem of banking, asset management, legal/tax professionals, and trust and corporate service providers; and
• Relocation planning: In relevant circumstances, family office planning can be integrated with Hong Kong’s broader talent/capital investment entrant scheme, as well as other related initiatives (subject to eligibility and additional requirements).

3.  What is a Family Office (and an SFO)?

A family office is the platform used to manage, preserve, and transfer wealth across generations—from a simple holding structure to an institutional-grade setup overseeing multi-asset, multi-jurisdiction portfolios.

An SFO is typically the private company that provides services to the family’s “specified persons” and manages the FIHV’s investment activities.

4.  Eligibility – Requirements at a Glance (FIHV + SFO)

To benefit from the concession, the structure is typically designed around these pillars:

A. FIHV – Core conditions

• Structure: an entity (incorporated in or outside Hong Kong) that is not a business undertaking for general commercial or industrial purposes (includes corporations, partnerships, trusts and legal arrangements).
• Ownership: generally ≥95% aggregate beneficial interest held (directly/indirectly) by members of a single family (special arrangements apply for qualified charitable entities).
• Normal management or control (“NMC”): Must be exercised in Hong Kong during the basis period.
• Management requirements: Managed by an eligible SFO in Hong Kong and meets the minimum asset threshold.
• Substantial activity requirements: Core income-generating activities must be carried out in Hong Kong, meeting minimum requirements for the number of qualified employees and the amount of annual operating expenditure. 

B. Eligible SFO – key features

An eligible SFO generally must:

• be a private company (incorporated in or outside Hong Kong) normally managed or controlled in Hong Kong.
• at least 95% of the beneficial interest is held directly or indirectly by family members (special arrangements apply for charitable entities).
• provide services to the family’s specified persons, with service fees chargeable to tax in Hong Kong.
• satisfy the safe harbour rule: at least 75% of assessable profits must be derived from services provided to specified persons.

Specified persons include: the related FIHV, FSPEs (held directly or indirectly by the FIHV), interposed FSPEs, and family members.

5.  Family Definition, Cessation of Spouse Status and Charitable Participation

• Definition of family members

Family members are defined broadly across generations, including spouses, lineal ancestors/descendants, siblings and their descendants. Adopted and step-children are also included under specified circumstances.

• Cessation of spouse status (e.g. divorce)

Where a person ceases to be a spouse for reasons other than death (e.g. divorce), that person and their connected persons may still be regarded as family members for the subject year and the following year.

• Charitable entity participation (Section 88 charitable institution/trust)

A charitable entity may hold up to 25% beneficial interest in the FIHV and/or Eligible SFO, provided the following thresholds are met:

• • The family holds at least 75% of the beneficial interest; and

• • Unrelated persons hold no more than 5% of the beneficial interest in total.

6.  Minimum Asset Threshold - HK$240 million

The aggregate net asset value of Schedule 16C “specified assets” managed by the eligible SFO for the family’s relevant FIHVs must be at least HK$240 million. In certain specific circumstances, even if the aggregate net asset value at the end of a given period falls below this threshold, it may still be considered as meeting the requirement based on the end-of-period data from the preceding year or the year before that.

Specified assets (examples under Schedule 16C)

• Securities;
• Shares, stocks, debentures, loan stocks, funds, bonds or notes of, or issued by, a private company;
• Futures contracts;
• Foreign exchange contracts under which the parties to the contracts agree to exchange different currencies on a particular date;
• Deposits other than those made by way of a money-lending business;
• Deposits (as defined by section 2(1) of the Banking Ordinance (Cap. 155)) made with a bank (as defined by Part 1 of Schedule 1 to the Securities and Futures Ordinance (Cap. 571));
• Certificates of deposit (as defined by Part 1 of Schedule 1 to the Securities and Futures Ordinance (Cap. 571));
• Exchange-traded commodities;
• Foreign currencies;
• Over-the-counter derivative products (as defined by Part 1 of Schedule 1 to the Securities and Futures Ordinance (Cap. 571)).

7.  Substance in Hong Kong - Minimum Requirements (and Outsourcing)

At a minimum, the structure must:

• Employ at least two qualified full-time employees in Hong Kong to carry out core income-generating activities; and
• Incur at least HK$2 million in operating expenses annually in Hong Kong for conducting relevant core income-generating activities.

Outsourcing to the eligible SFO is permitted (not for circumvention). The IRD typically considers facts and circumstances, and whether staffing/expenditure is commensurate with the activities conducted in Hong Kong.

8.  Qualifying vs Incidental Transactions (5% Rule)

• Qualifying transactions: transactions in Schedule 16C specified assets conducted in Hong Kong by/through, or arranged in Hong Kong by, the eligible SFO.
• Incidental transactions: must not exceed 5% of total trading receipts (qualifying + incidental) in the basis period.

9.  Concession at Multiple Levels

FSPEs commonly hold and administer underlying investments. The concession is available at:

• the FIHV level, and
• the FSPE level, to the extent corresponding to the FIHV’s beneficial interest in the FSPE.

10.  Anti-Avoidance

Hong Kong’s tax regulations also have specific safeguards in place regarding FIHV/FSPE investments in private companies:

A. Investing in private companies – the “three tests”

When an FIHV/FSPE invests in a private company, it can usually apply for profits tax exemption under the Inland Revenue Ordinance, but it must pass a series of anti-avoidance tests to ensure that the investment does not involve real estate speculation or manipulated short-term asset trading.

First, the primary condition for exemption is the real estate test. The real estate (excluding infrastructure) directly or indirectly held by the private company in Hong Kong must be kept at a low ratio, meaning the value of such assets must not exceed 10% of the private company’s total asset value. Once the proportion of real estate in Hong Kong exceeds this limit, the investment is considered property-related, and all profits generated will not enjoy the exemption and must be fully taxed.

If the private company passes the above real estate test, further determination will be based on the investment’s holding period and control. The ideal scenario is for the FIHV/FSPE to adopt a long-term investment strategy. If it holds securities of a private company for no less than two years, the profits will be directly exempt from tax regardless of whether the FIHV/FSPE has control.

For short-term exits of less than two years, the IRD will adopt a “look-through” review mechanism. In this case, if the FIHV/FSPE is merely a minority shareholder without decision-making influence (i.e. lacks control), profits will still be eligible for exemption. However, if the FIHV/FSPE has control over the private company, it must meet the “short-term asset test”: the total value of short-term assets (i.e. those held for less than three years and not specified financial assets) held internally by the private company must not exceed 50% of its asset value. This means that only when the controlled private company primarily engages in long-term asset allocation rather than frequent trading can the short-term exit profits of the FIHV/FSPE enjoy tax reduction.

If any transactions of a private company fail to pass the above tests, the profits earned from those ineligible transactions will not be subject to the profits tax concession. Profits earned by the FIHV/FSPE from other qualifying transactions remain unaffected.

B. Anti-round tripping provisions

This provision aims to prevent the misuse of tax concessions. The Hong Kong government is dedicated to ensuring only genuine family investments enjoy tax exemptions, preventing families from using complex structures to disguise taxable “business operating profits” as tax-exempt profits within FIHVs.

Given the flexibility of family office structures, if an FIHV is held by the following Hong Kong residents or certain Hong Kong entities, it will not trigger anti-avoidance scrutiny:

• Hong Kong resident individuals : Members of the family themselves.
• Certain Hong Kong non-person entities: Eligible SFOs and “specified entities”.
• Specified entities: Acts as a “passive conduit” between family members and the investment vehicle, and must meet the following criteria:

• • Pure holding nature: the specified entity must not engage in any trade or business.
  • Family beneficial ownership: family members must hold beneficial interests in the entity and possess at least 95% of the beneficial interests in the underlying investment vehicle (FIHV).

C. General anti-avoidance

To ensure the tax concession system is not misused, the IRD has established anti-avoidance provisions, including a “principal purpose test.” The core principle of this test is that tax exemptions should be granted to genuine business investments and family wealth management, but not to arrangements merely aimed at tax avoidance. 

When could one lose tax-exempt status?

To prevent tax abuse, if the Commissioner of the IRD is satisfied that:

• the main purpose, or one of the main purposes of an FIHV or an FSPE in entering into an arrangement; or
• the main purpose, or one of the main purposes of a person making a transfer of any asset or business to the FIHV or FSPE, 

is to obtain a tax benefit, whether for the FIHV or FSPE or another person or entity, the profits tax concession will not apply to the FIHV or FSPE concerned.

However, for a transfer of assets or business to an FIHV or FSPE, the profits tax concession may still apply if the transfer is carried out on an arm’s length basis and the transferor is chargeable to tax in respect of the assessable profits arising from the transfer.

11.  Election, record-keeping & advance ruling (tax certainty)

Election mechanism:

• made in writing
• applies to all subsequent years
• irrevocable

Record-keeping

FIHV responsible persons and the eligible SFO must keep sufficient records to readily ascertain beneficial ownership—penalties may apply for non-compliance without reasonable excuse.

Advance ruling

Families seeking tax certainty may apply for an IRD advance ruling.

12.  Latest Developments: Enhancements to the Tax Concession Regime for FIHV

To further enhance Hong Kong's competitiveness as an international asset and wealth management centre, the Hong Kong government announced a series of enhancement measures in March 2026, targeting FIHVs and related tax concession regimes. These measures aim to attract more funds and family offices to establish operations in Hong Kong. The key enhancement highlights are as follows:

• Expansion of eligible investment types: It was proposed that the new eligible investments include immovable properties outside Hong Kong, carbon emission derivatives or allowances and carbon credits, insurance-linked securities, equity interests in non-corporate entities, loans (including private credit investments), digital assets, precious metals, and specific commodities. These new investment types complement government policies in areas such as carbon trading, digital assets, and precious metals and commodities trading, thereby increasing investment flexibility for FIHVs.
• Removal of the 5% threshold for incidental transactions: This eliminates the existing restriction where incidental transaction income must not exceed 5% of total business income, providing greater flexibility for FIHVs and their FSPEs in earning profits from eligible investments (such as interest income). As long as specified conditions are met, the relevant profits can be exempted from profits tax.
• Relaxation of tax exemption treatment for FSPEs: Currently, the tax exemption for FSPEs is limited to the proportion held by the FIHV. After enhancement, FSPEs can enjoy full tax exemption regardless of the holding proportion. However, they must comply with the anti-round tripping provisions applicable to funds.

The proposed measures above aim to consolidate Hong Kong's leading position and attract more FIHVs and SFOs to establish operations in Hong Kong. Once the amendment bill is passed by the Legislative Council, the measures will take effect from the year of assessment 2025/26.

13.  How PKF Hong Kong helps

Advance Ruling Assistance for Family Office Tax Concession

We offer comprehensive support to families seeking tax certainty through the application for an advance ruling from the IRD. Our services include:

• Eligibility assessment 

We help clients clarify their family objectives concerning investment strategies, governance, succession planning, and philanthropy, while ensuring alignment with relevant regulatory frameworks.

• Strategic structuring 

Our team designs and implements effective governance frameworks for SFO, FIHV and FSPE, ensuring compliance with statutory definitions and anti-avoidance safeguards.

• Application support 

Our tax specialists prepare the necessary submissions, manage supporting evidence, and liaise with the IRD to address any queries that may arise during the process.

• Ongoing compliance checks

We assist in conducting regular reviews of compliance thresholds, including employee counts, expenditure limits, and operational substance requirements, ensuring families maintain eligibility for the concession.

• Tax compliance support

We provide a coordinated approach to tax filings tailored to your family’s structure.

We are committed to guiding families through every step of the application process, ensuring a seamless experience in securing the Family Office Tax Concession.

FAQs

1. Can an FIHV be incorporated outside Hong Kong?

Yes, an FIHV can be established both in and outside of Hong Kong. However, it must meet certain conditions in Hong Kong, including maintaining NMC, eligible SFO management and other substantive requirements.

2. Do you need an SFC licence?

Typically, no. If an SFO manages a single family's assets and does not provide regulated services to third parties, licensing may not be necessary. However, this depends on specific circumstances. We can coordinate with legal counsel as needed.

3. Is an advance ruling required to obtain the 0% tax concession?

An advance ruling is not mandatory according to the legislation. However, in cases involving more complex structures - such as trusts, foundations, multi-tier ownership arrangements, or significant private company investments - an advance ruling can provide additional certainty.

4. How long does the advance ruling take?

The advance ruling process normally takes 3 to 6 months. This timeframe may extend if restructuring is required, if multi-jurisdiction trustees are involved, or if the preparation of the advance ruling is extensive.

Contact us

If you are establishing a family office, migrating an existing structure to Hong Kong, or seeking to confirm eligibility for the 0% profits tax concession, PKF Hong Kong can help you proceed with confidence.

Contact us to arrange a confidential consultation

Disclaimer: This webpage is general information only and does not constitute tax/legal advice. Eligibility and outcomes depend on your facts and the prevailing law and IRD practice.