Hong Kong Enhances Fund and Family Office Tax Incentives under UFE

Hong Kong proposed new family office tax reforms, signaling growing opportunities for asset managers and investors. Relevant stakeholders should closely monitor developments and assess how potential changes may impact their structuring, tax efficiency, and compliance positioning.

On June 12, 2026, the Hong Kong government gazetted the Inland Revenue (Amendment) (Tax Concessions for Funds, Family Investment Holding Vehicles, and Carried Interest) Bill 2026, introducing targeted enhancements to its fund and family office tax regime, commonly known as the Unified Fund Exemption (UFE) regime. The reforms aim to strengthen Hong Kong’s position as a leading global hub for asset management and wealth management, particularly as competition intensifies across Asia.

These changes are especially relevant for asset managers, fund managers, family offices, and high-net-worth individuals assessing Hong Kong as a preferred jurisdiction for structuring investment activities.

Key changes to the Hong Kong tax regime

The bill introduces several refinements designed to increase flexibility while aligning with international standards:

• Expanded definition of “fund”: More investment structures will qualify under Hong Kong’s UFE regime, improving accessibility for different fund types, including Open-Ended Fund Companies (OFCs) and Limited Partnership Funds (LPFs). Notably, the expanded definition will also bring single investor funds within the scope of the tax incentives for the first time.
• Broader scope of eligible investments: The inclusion of assets such as private credit, digital assets, and commodities, as well as precious metals and immovable property located outside Hong Kong, reflects evolving investor demand and market trends.
• Removal of the five percent incidental transaction threshold: This simplifies compliance by allowing funds greater flexibility in handling ancillary transactions without jeopardizing tax benefits.
• Relaxed treatment for special purpose entities (SPEs): Both general and family-owned SPEs can benefit from more favorable tax treatment, facilitating efficient investment structuring.
• Revised calculation of the minimum asset threshold: The bill adjusts how the minimum asset threshold is calculated, offering funds and family offices greater flexibility in meeting eligibility requirements.
• Enhanced carried interest tax concessions: Adjustments aim to ensure Hong Kong remains competitive with other major fund domiciles.

At the same time, the bill introduces tax reporting requirements and strengthens economic substance requirements for family investment holding vehicles.

Also read: Hong Kong’s Incentives for Family Offices

Implications for funds and family offices

The updated Hong Kong fund tax regime provides greater clarity and flexibility, which is likely to benefit private equity, venture capital, and private credit funds operating across Asia.

For asset managers and fund managers, the expanded investment scope and simplified rules reduce structural constraints and compliance risks. This is particularly valuable for funds engaging in multi-asset strategies or operating across multiple jurisdictions.

For family offices, the reforms enhance Hong Kong’s attractiveness as a base for managing global wealth. The relaxed rules for family investment holding vehicles enable more efficient ownership and asset allocation structures. However, the introduction of substance requirements means that entities must demonstrate real economic activity in Hong Kong, such as local management and decision-making.

Investors may also need to review existing structures to ensure continued eligibility under the updated tax framework, particularly where new reporting or substance rules apply.

Also read: Setting Up a Family Office in Hong Kong

Strategic positioning in Asia

The reforms come at a time when Hong Kong is reinforcing its role as a cross-border wealth management center, supported by national policy direction and growing capital flows within Asia.

By enhancing its family office tax incentives and carried interest regime, Hong Kong is positioning itself to compete more effectively with other regional hubs, such as Singapore. The inclusion of digital assets and emerging investment categories also signals a forward-looking approach, aimed at capturing new areas of financial growth.

Meanwhile, the balancing of tax incentives with compliance and reporting obligations reflects a global trend: jurisdictions are competing on attractiveness while maintaining regulatory credibility.

Outlook

The bill was introduced for its first reading on June 24, 2026. Once enacted, the reforms are expected to apply retrospectively from the year of assessment 2025/26, further strengthening Hong Kong’s appeal as a hub for fund structuring, wealth management, and cross-border investment.

Overall, the changes make Hong Kong more competitive for asset managers, funds, and family offices, while raising the bar for compliance and substance—an increasingly standard feature of global financial centers.

How Dezan Shira & Associates can help

As Hong Kong refines its fund and family office tax regime, asset managers and family offices should reassess their structuring and compliance strategies. Dezan Shira & Associates, an Ascentium company, advises asset managers, fund managers, family offices, and high-net-worth individuals on Hong Kong entity setup, tax structuring, and regulatory compliance. Our team helps clients evaluate eligibility under preferential regimes and implement substance requirements effectively.

Beyond tax and structuring, Dezan Shira and Ascentium also support fund managers with operational needs such as Hong Kong payroll, HR, and licensing assistance — helping managers navigate common pain points as they establish or scale their presence in Hong Kong.

For tailored advice on navigating these changes, contact our experts.

Tax planning and compliance in Hong Kong require careful navigation of evolving local and international tax rules. Our experienced advisors support businesses with corporate tax, indirect tax, individual tax, international tax, and transfer pricing, helping them remain compliant while optimizing their tax position in Hong Kong and the wider Asia?Pacific region.

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