On 12 Aug 2026, the Financial Services and the Treasury Bureau responded to media enquiries regarding the preferential tax regime for carried interest under the Inland Revenue (Amendment) (Preferential Tax Regimes for Funds, Family-owned Investment Holding Vehicles and Carried Interest) Bill 2026. The Bill aims to attract funds and family offices to Hong Kong, with measures targeting effect from the 2025/26 assessment year subject to LegCo passage.
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SPOTLIGHT ON
FAMILY OFFICES
On 12 Aug 2026, the Financial Services and the Treasury Bureau issued a reply regarding the Inland Revenue (Amendment) (Preferential Tax Regimes for Funds, Family-owned Investment Holding Vehicles and Carried Interest) Bill 2026. Introduced to the Legislative Council in June 2026, the Bill seeks to enhance tax regimes for privately offered funds, family-owned investment holding vehicles, and carried interest. The Government aims to attract more funds and family offices to establish a presence in Hong Kong, encourage global capital management locally, and stimulate related investment management activities.
Scope of Preferential Tax Regime and Fund Definition
The Bill expands the preferential tax regime for carried interest beyond private equity to include other profits of eligible funds, granting both profits tax and salaries tax concessions. Under the Inland Revenue Ordinance ("IRO"), a "fund" is defined such that participating persons do not exercise day-to-day control over property management. Consequently, proprietary trading businesses that trade or hold assets on their own account do not qualify as "funds," and their distributed remuneration is ineligible for the proposed tax concessions.
Eligibility of Carried Interest and Investment Services
Eligible carried interest refers to non-discretionary returns linked to a fund's investment performance, earned by fund management companies or qualifying employees providing investment management services in Hong Kong. These services encompass: (a) seeking funds for the fund; (b) researching and advising on potential investments; (c) acquiring, managing, or disposing of property; and (d) assisting invested entities in raising funds. Qualification depends on whether the employee's duties substantively constitute these investment management services.
Legislative Progress and Implementation Details
The Bill refines distribution requirements, including broadening the scope of "associate" and allowing qualifying employees to receive carried interest through other entities. Following clause-by-clause examination by the LegCo Bills Committee, the Government targets resuming second reading debate in the second half of 2026. Subject to LegCo passage, measures will take effect from the 2025/26 year of assessment, with the Inland Revenue Department issuing administrative guidance to clarify implementation. The Government confirms no plans to further expand these preferential measures.
Industry Engagement and Strategic Expectations
The Government maintains close liaison with industry, including local and overseas fund management companies, regarding policy intent and implementation details. Several firms have expressed interest in establishing or expanding operations in Hong Kong due to the proposed tax incentives. These measures are expected to attract global capital, encourage fund establishment, and strengthen Hong Kong's competitiveness as a leading international asset and wealth management centre. Issued at HKT 19:34 on Wednesday, August 12, 2026.
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