Top 4 reasons to domicile a VC fund in Hong Kong
Hong Kong has established attractive structures and fund incentives in a bid to become the capital centre of Asia. What are these structures and incentives? Read on to know more about the current venture capital Hong Kong domiciliation environment.
First, why Hong Kong? Net fund inflows for the asset and wealth management business reached HKD2,152 billion in 2021, according to a
1. Open-Ended Fund Company (OFC)
Hong Kong’s answer to an investment vehicle is the
An OFC in Hong Kong can be public or private. Public OFCs can be offered to the public, while private OFCs are offered privately.
Here are some of the strengths of an OFC:
It’s in a corporate structure with a separate legal personality
Shareholders can have limited liability
Private OFCs have no investment restrictions.
OFC shares may be issued or cancelled to meet shareholder subscriptions and redemption requests. Conventional companies incorporated in Hong Kong do not have this flexibility.
Provided the statutory solvency and disclosure requirements are met, distribution of assets out of share capital is allowable
In addition, Hong Kong’s
2. Limited Partnership Fund (LPF)
Inspired by the known offshore limited partnership fund vehicles, Hong Kong established the
A qualifying fund for registration under the LPF regime must consist of one general partner (GP) taking on an unlimited liability of the debts and liabilities of the fund, and at least one limited partner (LP) with limited liability.
Here are the strengths of an LPF:
No capital gains tax
No stamp duty is imposed on any contribution or withdrawal by any LP. The same goes for any transfer of partnership interest.
The LPF is exempted from profits tax if they meet certain conditions
It is not required to publicly disclose the identity of the LP
The LPF is not subject to investment restrictions.
Are you interested in forming a fund in Hong Kong? Want to know more about the difference between setting up as an OFC or an LPF? Our
3. Unified Funds Tax Exemption
The Inland Revenue Department (IRD) published the
For OFCs, profits may be exempt from tax even if those profits are not from qualified transactions provided specific conditions are met. If an LPF is able to meet the conditions of the
Curious if you are able to qualify for the tax exemption and tax concessions in Hong Kong? Our Hong Kong fund services representative can answer your questions on the country’s tax system and at the same time guide you in setting up a fund there,
4. Proposed Family Office Tax Exemption Regime
Family Offices were still optimistic about investing in venture capital despite the pandemic. A
This year the Hong Kong government has initiated a formal consultation proposing a profits tax exemption for family office businesses in the country. The subjects of the proposed exemption are family-owned investment holding vehicles (FIHV) managed by single-family offices (SFO) in Hong Kong.
Under this proposal,an FIHV managed by an SFO in Hong Kong would be exempt from Hong Kong profits tax for its profits derived from certain qualifying transactions and incidental transactions (subject to the 5% threshold). This new tax exemption is expected to apply from the year of assessment 2022/23.
Despite challenging times ahead, Hong Kong is bent on solidifying its reputation as a premier international financial and wealth management centre. Just as development is constant in the fund industry, digitalisation has become a continuous growing companion to fund management. Are you interested in reading more about management software? We have an article showing
Or are you interested in catching one of the opportunities in Hong Kong’s fund industry? Do you wish to set up a fund in the bustling market or are you a fund manager looking for a companion in assisting you as you raise your portfolio in the country?
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