How to Structure a Family Office in Hong Kong

Are you considering Hong Kong as the base for your family office? Qualifying structures pay no profits tax on their investment returns, and there is no approval process to go through. You claim the concession yourself when you file your annual tax return.

To qualify, your structure needs HK$240 million in eligible assets, two full-time staff in Hong Kong, and HK$2 million in annual local spend. These thresholds make Hong Kong better suited to larger family portfolios.

In this article, we will walk you through how Hong Kong compares with Singapore and Dubai, what qualifies for the tax concession, and how to set up your structure.

What Qualifies for the 0% Profits Tax Concession

Schedule 16E to the Inland Revenue Ordinance (Cap. 112) establishes the legal foundation for Hong Kong’s family office tax regime. Introduced under Ordinance No. 8 of 2023, it applies to Family-owned Investment Holding Vehicles (FIHVs) and Family-owned Special Purpose Entities (FSPEs).

To qualify for the 0% profits tax rate, you must satisfy five conditions simultaneously during the assessment year:

1. Beneficial Ownership: At least 95% of the beneficial interest in the FIHV must belong to members of a single family.
2. Central Management: You must exercise central management and control of the FIHV within Hong Kong.
3. Management Entity: An eligible Family Office operating in Hong Kong must be at least 95% beneficially owned by the same family. At least 75% of its assessable profits must be from management services provided to your specified vehicles. 
4. Economic Substance: You must employ at least two full-time, qualified local staff. In addition, the structure requires an annual local operating spend of at least HKD 2 million.
5. Asset Threshold: The SFO must manage at least HKD 240 million in Schedule 16C qualifying assets across the family's FIHVs.

How is “Family” Defined in Hong Kong

Under Schedule 16E of the Inland Revenue Ordinance (Cap. 112), family membership is traced directly from a single reference natural person (Person A). Person A can include both living and dead individuals such as:

• The primary principal and their spouse.
• Lineal ancestors of the principal and spouse.
• Lineal descendants of the principal and spouse (including step-children, adopted children, and children born outside marriage).
• Siblings of the principal and spouse.
• Spouses of those lineal descendants and siblings.

Election and Anti-Avoidance Rules

You do not submit a pre-approval application to claim the tax concession. Instead, you make a formal election in your annual profits tax return. This election is irrevocable and applies to every subsequent year. 

However, meeting the minimum thresholds (2 staff and HKD 2 million spend) does not automatically guarantee this exemption. Under Section 10(1) of Schedule 16E, the Commissioner of Inland Revenue can evaluate whether staff and spend are adequate for your portfolio's scale.

Which Assets Count Toward the HKD 240 Million Threshold

To qualify for tax exemption, an FIHV must hold at least HKD 240 million in assets approved under Schedule 16C. 

Excluded Assets

Families often miscalculate eligibility by counting non-qualifying assets. These assets do not count towards the HKD 240 million threshold: 

The following assets do not count toward the HKD240 million threshold:

• Hong Kong residential or commercial real estate.
• Controlling stakes in commercial operating companies outside Schedule 16C classes.
• Art portfolios, wine collections, aircraft, and luxury yachts.
• Physical precious metals held outside specified trading exchanges.

For example, a family holds HKD400 million in total assets shown on a bank statement. The portfolio includes HKD200 million in Hong Kong commercial real estate, HKD60 million in physical artwork, and HKD140 million in global stocks. 

Because real estate and artwork are excluded, the qualifying Schedule 16C assets equal only HKD 140 million. This structure falls short of the HKD240 million baseline.

Qualifying Assets

Under Schedule 16C, the following assets count directly toward your HKD 240 million baseline:

• Securities: Listed and unlisted global stocks, corporate bonds, and debt instruments.
• Derivatives & FX: Futures contracts and foreign exchange contracts.
• Cash Equivalents: Bank deposits and Certificates of Deposit (CDs).
• Financial Commodities: Exchange-traded commodities and OTC derivatives.
• Private Equity: Shares in private corporations, provided Hong Kong real estate makes up no more than 10% of the entity's asset value.

Hong Kong Residency Through Investment

Principals can connect their family office structure with Hong Kong residency through the New Capital Investment Entrant Scheme (New CIES). It allows you to obtain Hong Kong residency by committing an HKD 30 million (~USD 3.8 million) minimum capital investment into eligible assets. 

This is split into two parts: 

1. HKD 27 Million (Flexible Allocation): Allocated across permissible financial assets (listed equities, debt securities, CDs, LPFs, OFCs) and/or eligible real estate.
2. HKD 3 Million (Mandatory Allocation): Deposited into the government-backed CIES Investment Portfolio (managed by Hong Kong Investment Corporation Limited to support local growth and technology sectors).

Qualifying financial assets held under the New CIES scheme can be owned inside a holding company managed by your SFO. This allows those assets to count toward the HKD 240 million FIHV tax exemption threshold.

Maintaining these investments for seven continuous years allows you, your spouse, and unmarried dependent children to apply for Permanent Residence (PR) in Hong Kong. 

Choosing Your Investment Vehicle (LPFs vs OFCs)

In the past, high-networth families relied almost exclusively on offshore jurisdictions like the Cayman Islands and the British Virgin Islands (BVI). However, global tax transparency initiatives (e.g. Common Reporting Standard and strict economic substance rules) have sharply increased compliance overhead for traditional offshore entities.

To transition onshore in Hong Kong, you need to establish an investment vehicle to dictate how your wealth is treated under Hong Kong law. You can either choose between a Limited Partnership Fund (LPF) or an Open-ended Fund (OFC). 

Here’s how they compare side-by-side: 

Limited Partnership Funds (LPFs)

LPFs are closed-end structures best for private equity, venture capital, private credit, and real estate holdings. This vehicle is governed under the Limited Partnership Fund Ordinance (Cap. 637). 

LPFs feature flexible terms between the General Partner (GP) and Limited Partners (LPs). The GP manages operations while LPs receive limited liability protection. You register an LPF directly with the Companies Registry, and limited partner identities remain private from public registers.

Open-ended Fund Companies (OFCs)

OFCs are commonly used for public equities, foreign exchange, corporate bonds, and hedge fund strategies. This structure is governed under the Securities and Futures Ordinance (Cap. 571). 

An OFC features variable share capital that allows issuing and redeeming shares at Net Asset Value. OFCs register directly with the Securities and Futures Commission (SFC) and can adopt umbrella structures with segregated sub-funds to prevent cross-liability.

If you are unsure which legal vehicle fits your profile, get in touch with our compliance team for free expert advice. 

Do you need an SFC License?

A Single Family Office (SFO) that exclusively manages assets for one family line does not require an SFC asset management license (such as a Type 4 or Type 9 license).

SFOs use the intra-group carve-out under the Securities and Futures Ordinance (Cap 571) to stay exempt from licensing. By serving only your own family holding entities at cost, you can avoid being classified as a commercial business.

However, you can lose your licensing exemption if your office expands services outside the single-family structure. Here are common breaches to look out for: 

• Managing money for close friends or commercial partners.
• Charging commercial management fees or performance carry.
• Managing capital for individuals outside the family definition in Schedule 16E.

Crossing these lines transforms your entity into a Multi-Family Office (MFO). MFOs must obtain Type 1, Type 4, and Type 9 licenses. On top of that, they are required to satisfy liquid capital rules, employ Responsible Officers (ROs), and comply with public audits.

How to Set Up a Single Family Office in HK

Although incorporating a legal entity in Hong Kong only takes a few business days, a fully operational SFO can take up to 24 weeks to establish. In the timeline, we included processes such as bank account activation, office set up, and tax qualifications. 

1. Legal Structuring & Setup (1-4 weeks)

This step aims to establish the corporate foundation of your SFO and confirms your regulatory licensing safe harbors before capital injection. 

You need to incorporate a private limited company in Hong Kong to act as your SFO. We incorporate your private limited company and file all necessary registration documents directly with the Companies Registry. This process also includes setting up your FIHV and any required fund structures whether LPFs or OFCs. 

To ensure that you don’t need an SFC license, we can also help verify that your SFO only serves your own family group under Cap. 571.

2. Bank Accounts & Asset Transfers (6 to 12 Weeks)

The Hong Kong Monetary Authority (HKMA) Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) guidelines require background verification for high-net-worth principals. This represents a major bottleneck in the Family Office set up process. 

Banks perform Know-Your-Customer (KYC) checks which include submitting formation papers, ownership charts, and Source of Wealth (SoW). Once a corporate bank account is set for your FIHV, you can execute asset transfers to meet statutory HKD 240 million requirements. 

Emerhub acts as your licensed Company Secretary and Trust or Company Service Provider (TCSP). We handle all statutory AML files and maintain your registers on your behalf.

3. Hiring Staff and Office Setup (4 to 8 Weeks)

To secure the 0% profits tax concession, your family office must build genuine local operational presence in Hong Kong.

• Hire Local Staff: Employ at least two full-time qualified local professionals in Hong Kong (e.g., local investment managers, finance officers, or compliance leads).
• Secure Physical Premises: Lease a dedicated commercial office space in Hong Kong.
• Structure Local Spend: Ensure your annual operating budget satisfies the HKD 2 million local spending threshold.

4. Tax Election and Annual Compliance (Annual, Year-end)

Hong Kong’s 0% tax concession relies on an irrevocable self-assessment mechanism. Instead of the upfront regulatory queue, you must file this self-assessment together with your annual tax return. 

Here’s what you need: 

• Supplementary Form S20 alongside company's annual Profits Tax Return via the Business Tax Portal.
• Form IR1480 to verify family relationships tracing back to the primary principal (Person A).

Throughout operations, you must retain trade confirmations, bank statements, valuation reports, and even meeting minutes to support your tax status. This is especially important during routine Inland Revenue Department (IRD) reviews. 

How Hong Kong Compares to Singapore and Dubai

Hong Kong is often compared to other financial hubs like Singapore and Dubai. In a nutshell, Hong Kong is preferable if you are prioritizing quick set up with zero pre-approval. Meanwhile, Singapore offers strong institutionalized stability and structured tax incentive frameworks. On the other hand, Dubai is a tax-free haven that connects you to Middle-eastern and European markets. 

Key Strategic Contrasts: 

• Self-Election vs. Discretionary Approval: Hong Kong’s tax concession operates through a self-election mechanism in your annual tax return. In contrast, Singapore’s Section 13O and 13U schemes require formal pre-approval from the Monetary Authority of Singapore (MAS).
• Threshold Tradeoffs: Singapore’s Section 13O requires an entry threshold of SGD 20 million in designated investments, which is lower than Hong Kong’s HKD 240 million baseline. However, families managing larger asset pools often choose Hong Kong to avoid administrative approval queues.
• Legal Continuity: While the DIFC offers a 0% tax framework within a common-law Free Zone, it sits inside a broader civil law jurisdiction. Hong Kong provides an independent common law judiciary with an established appellate tradition.
• Mainland China Connectivity: Hong Kong provides direct, preferential access to Mainland China’s capital markets, deal flow, and technology liquidity through Greater Bay Area (GBA) channels. Neither Singapore nor Dubai offers this degree of market integration.

Core Regulatory and Tax Frameworks

The structural approach to tax exemptions and entity approvals differs significantly across the three jurisdictions.

Capital and Economic Substance Requirements

Minimum asset thresholds and mandatory operational expenditure dictate the baseline cost of running a Family Office. Here’s how each jurisdiction compares with each other:

Strategic Access and Residency Pathways

Jurisdictions vary in how they connect private wealth structures to migration programs and regional capital markets.

*Residential real estate qualifies only if the single property is valued at HK$30 million or above. The amount that can be counted toward CIES is capped at HK$10 million. 

Hong Kong is ideal for capital efficiency and long-term legal status. You can use the same HKD 30 million investment to secure a 7-year path to Permanent Residency while satisfying your tax exemption baseline. 

If you prefer instant residency, Singapore and Dubai are preferable. Singapore grants upfront, direct Permanent Residency if you have a massive asset base (SGD 200 million). Meanwhile, Dubai allows low-barrier regional residency with minimal physical presence under the UAE Golden Visa scheme. 

Our regulatory experts can guide you through your decision process on where to establish a Family Office based on your current needs and situation.

Setting Up Your Hong Kong Family Office with Emerhub

Emerhub’s compliance experts can help you establish a family office in Hong Kong. With our incorporation services, we can help you with the following: 

• Corporate Entity Formation: Incorporating private limited companies, Family-owned Investment Holding Vehicles (FIHVs), and local operating entities.
• Corporate Secretarial & Compliance: Managing ongoing statutory filings with the Companies Registry and Inland Revenue Department.
• Banking & Custodial Setup: Assisting with local corporate banking solutions and account opening procedures.
• Licensing Verification: Ensuring your entity setup aligns with Hong Kong’s SFO license exemption guidelines.

Emerhub manages the end-to-end incorporation process so your family office can focus on long-term wealth preservation. Contact our local experts for a free consultation.