The 2026 fund and family office tax bill: what changes for private wealth in Hong Kong

Context

Hong Kong has spent the past decade building tax regimes to attract asset managers and wealthy families. The unified fund exemption (2019) exempts qualifying funds from profits tax on qualifying transactions. The family-owned investment holding vehicle (FIHV) regime (2023) offers a 0% rate to vehicles managed by an eligible single family office, provided they hold at least HK$240 million in specified assets and meet substance requirements. A carried interest concession (2021) taxes eligible carried interest at 0%.

Each regime worked, but each also had limits. Private credit, digital assets and physical commodities sat awkwardly within the lists of qualifying investments. The 5% threshold for "incidental" income meant that a small amount of non-qualifying activity could put the whole exemption at risk. The carried interest regime required HKMA certification and a hurdle rate, which few managers found practical. The 2026-27 Budget, delivered in February, noted that the number of single family offices in Hong Kong had exceeded 3,300 and promised enhancements.

What changed

On 12 June 2026, the government gazetted the bill, which was introduced into the Legislative Council for first reading on 24 June. According to the government and an EY tax alert, the main proposals are:

A broader definition of fund. A single-investor vehicle (a "fund of one") would be able to qualify as a fund, provided its net asset value is at least HK$240 million. Previously, the absence of multiple investors could disqualify a structure.

More qualifying investments. The list would expand to include loans and private credit, insurance-linked securities, immovable property outside Hong Kong, and digital assets, with precious metals and specified commodities included subject to limits. Shares in private companies that trade or develop Hong Kong immovable property would remain excluded.

No 5% incidental cap. Income from incidental transactions would be exempt without the existing 5% threshold.

Special purpose entities. Exemption for SPEs and family-owned SPEs would be relaxed, giving more flexibility in holding structures.

FIHV refinements. Shareholder loans would no longer be deducted when calculating whether the HK$240 million asset threshold is met.

Carried interest. The concession would no longer require HKMA certification or a hurdle rate, and would cover returns from listed securities and performance fees of hedge funds.

Safeguards. Funds under the unified regime would become subject to a tax reporting mechanism and economic substance requirements similar to those for FIHVs. An anti-round-tripping rule would apply to financial institutions with 20% or more interests.

The changes are designed to apply from the year of assessment 2025/26, and transitional arrangements would allow filings on that basis.

The bill now goes to the Legislative Council, where a bills committee is expected to scrutinise it clause by clause. Drafting changes are possible, particularly on the limits for precious metals and commodities and on the detail of the substance and reporting requirements, so families should treat the current text as a strong indication of direction rather than final law.

Implications for investors, families and businesses

For single family offices, the expanded asset list matters most. Many families already hold private credit, digital assets or gold. Under the current regime, gains on those holdings may be taxable even when the rest of the portfolio is exempt. If the bill passes, a broader range of portfolios could sit entirely within the exemption, which reduces the need for parallel structures.

For asset managers, the fund-of-one rule and the simplified carried interest regime remove two frequent obstacles. Hedge fund managers in particular would, for the first time, see performance fees eligible for the carried interest concession.

For investors in private credit, the change is significant. Hong Kong would offer a clear tax position for lending funds, an area that has grown rapidly in Asia.

For families considering Hong Kong versus Singapore, the changes narrow some of the practical differences, though decisions should still be driven by where family members live, where the investment team sits and how much substance the family can support.

Retrospective application is helpful, but the bill still needs to pass. Families should plan on the current law while preparing for the new one.

Questions to consider

• Which assets in our portfolio are currently outside the qualifying investment list, and would the bill bring them in?
• Do our structures rely on the 5% incidental income threshold today?
• Would a fund-of-one structure simplify our arrangements, and do we meet the HK$240 million threshold?
• Do we have the staff, spending and decision-making in Hong Kong needed to meet substance requirements?
• If we manage third-party money, how would the carried interest changes affect our compensation design?

Closing

The 2026 bill is less a new regime than a clean-up of existing ones. That is its strength. By aligning the exemptions with how wealthy families and asset managers actually invest, Hong Kong is removing friction rather than adding incentives. The detail will be debated in committee over the coming months, and the final text is what matters.