Hong Kong has proposed amendments to its tax concession regimes for funds and family-owned investment holding vehicles.

For asset managers, private wealth families and investment holding structures, the proposals are worth watching closely. They may affect how certain investment profits are treated for Hong Kong profits tax purposes.

However, the changes are not yet implemented in law.

The relevant Bill was gazetted on 12 June 2026. The proposed tax concessions remain subject to passage by the Legislative Council of Hong Kong. Until then, taxpayers should avoid presenting the proposals as existing law or relying on them as if they already apply.

This article looks specifically at what may change for:

• Funds
• Family-owned investment holding vehicles, or FIHVs
• Special purpose entities, or SPEs
• Investment assets that may become more relevant under the proposed framework

Key Proposed Changes for Funds and Family Offices

The proposed amendments appear to focus on making Hong Kong’s existing concessionary regimes more workable for modern investment structures.

At a practical level, the proposals may affect four areas:

1. Who can qualify
2. What assets can be covered
3. How SPEs are treated
4. How incidental income is handled

This is different from a general reduction in profits tax. The proposed concessions remain targeted regimes for specific investment structures and transactions.

That distinction matters. A fund, FIHV or SPE should still be reviewed against the relevant conditions before any concession is claimed.

1. A Wider Fund Definition May Help Bespoke Fund Structures

One proposed change concerns the definition of a fund.

This is significant because fund structures are not always widely pooled vehicles with many unrelated investors. Some commercial fund arrangements are more bespoke.

For example, a fund may be designed for:

• One institutional investor
• A sovereign wealth investor
• A pension investor
• A family-backed investment mandate
• A small group of connected investors
• A platform structure with segregated investment strategies

These arrangements may still involve professional investment management, defined investment objectives and investor protections. But they may not always fit comfortably within a narrow fund definition.

The proposed widening of the fund definition may therefore be relevant for fund-of-one or similar structures.

Fund status should be checked, not assumed

The proposed widening of the fund definition may be helpful for certain fund-of-one or bespoke investment arrangements.

However, whether a structure qualifies will still depend on its legal form, investor arrangements, management structure and supporting documents. A vehicle with one investor, or a small group of connected investors, may require a more careful review than a conventional pooled fund.

If your fund structure has previously fallen into a grey area, this may be a good time to reassess whether the proposed concessions could change the position.

At HKWJ Tax Law, we can review the fund documents and structure to help identify whether the proposed changes may be relevant before any tax filing position is taken. 

2. Qualifying Assets May Better Reflect Modern Investment Portfolios

A second important area is the proposed expansion of qualifying investment assets.

This could be one of the most commercially relevant changes.

Many funds and family offices now hold assets beyond listed shares, bonds or conventional securities. Their portfolios may include private credit, tokenised assets, overseas property, carbon-related products or other alternatives.

If the proposed changes are enacted, the asset scope may become more aligned with real-world investment strategies.

Assets that may become more relevant include:

• Loans and private credit instruments
• Digital assets
• Carbon credits
• Insurance-linked securities
• Interests in overseas immovable property
• Commodities
• Precious metals
• Other alternative investment assets

Asset classification may decide whether the concession is useful

The proposed expansion of qualifying assets may be particularly relevant for funds and family offices holding non-traditional investments.

However, not every alternative asset will necessarily be treated in the same way. The tax analysis may differ depending on how the asset is held, how the return is generated and which entity earns the profit.

If your portfolio includes alternative assets, HKWJ Tax Law can help assess whether the proposed concessions may improve the Hong Kong tax position and where further review is needed.

3. Private Credit Structures Should Review Interest and Loan Income

The proposed removal of the existing 5% incidental income cap may be particularly relevant for private credit and debt-focused strategies.

Under the current framework, income that is incidental to qualifying transactions can create complications if it exceeds the permitted threshold.

For funds that invest in loans or debt instruments, the distinction between qualifying income and incidental income can be important.

A private credit strategy may involve:

• Interest income
• Arrangement fees
• Commitment fees
• Discount or premium on loan acquisition
• Gains on loan disposal
• Security enforcement proceeds
• Hedging income

Not all of these items should automatically be treated the same way.

Private credit income needs a closer review

Private credit structures may be among the more commercially affected by the proposed changes, particularly if interest income, loan gains or incidental income limits have been an issue.

That said, private credit returns can take different forms. Interest, arrangement fees, commitment fees, gains on assignment and enforcement proceeds may not always have the same tax treatment.

A broad assumption that all loan-related income will qualify could create risk.

HKWJ Tax Law can help analyse the income streams in a private credit or debt-focused structure and assess how the proposed removal of the 5% incidental income cap may affect the position.

4. Family-Owned Investment Holding Vehicles May Gain More Flexibility

The proposed amendments are also relevant to eligible family-owned investment holding vehicles, commonly known as FIHVs.

An FIHV is not just any company owned by a wealthy family. It is a specific type of vehicle that must satisfy relevant conditions under the family office concession regime.

The proposed changes may make the regime more useful for families with diversified portfolios.

This is important because many family offices invest through a mix of:

• Direct investment companies
• Holding companies
• Trust-owned structures
• Co-investment vehicles
• Fund interests
• Private companies
• Overseas property structures
• Debt investments
• Alternative assets

Where the qualifying asset scope is widened, some FIHVs may find that more of their investment activities are potentially covered.

Family ownership and management should be mapped carefully

For family offices, the proposed changes may be helpful only if the structure satisfies the relevant FIHV and single family office conditions.

In practice, this often requires more than confirming that the investment vehicle is family-owned. Trusts, family companies, nominee arrangements, co-investments and employee participation may all affect the analysis.

The management arrangements should also support the intended position.

HKWJ Tax Law can help families map the ownership and management structure to identify whether the proposed family office concessions may be available and what issues should be addressed first.

5. SPE Treatment May Be Crucial for Layered Structures

Special purpose entities are often the practical link between the main investment vehicle and the underlying asset.

A fund or FIHV may use SPEs for many reasons, including:

• Holding portfolio companies
• Holding overseas real estate
• Ring-fencing liability
• Facilitating financing
• Meeting regulatory requirements
• Separating investment strategies
• Simplifying exits

The proposed changes may improve how SPEs are treated under the fund and family office concession regimes.

This could be important where profits arise at the SPE level, rather than directly in the fund or FIHV.

Example

A family-owned investment holding vehicle holds an overseas property through an intermediate SPE.

If the asset scope and SPE treatment are expanded under the final law, the structure may have a better chance of falling within the concessionary framework.

But the analysis would still need to cover:

• Whether the main vehicle is an eligible FIHV
• Whether the SPE is sufficiently connected to that FIHV
• What asset the SPE holds
• What income or gains arise in the SPE
• Whether the SPE performs only investment holding functions or carries on broader business activities

The SPE point is therefore not just an administrative detail. It may affect whether the concession works in practice.

6. Existing Structures Should Be Checked Before the Bill Is Passed

Because the concessions are still proposed, some taxpayers may be tempted to wait.

That may be understandable, but it can also be inefficient.

A preliminary review can help funds and family offices understand whether the proposed changes are likely to matter.

This is especially useful where:

• A fund was previously outside the concession because of asset type
• A fund-of-one structure was uncertain
• A family office holds alternative assets
• SPEs are central to the structure
• Private credit income created incidental income concerns
• The group expects to make new investments soon
• Tax filing positions may need to be prepared shortly after enactment

A review now does not mean claiming the concession now.

It means identifying what should be ready if the Bill is passed.

7. Documentation Will Remain a Practical Risk Area

The proposed changes may expand the regimes, but they do not remove the need for proper documentation.

For funds, key documents may include:

• Offering memorandum or private placement memorandum
• Limited partnership agreement
• Subscription documents
• Investment management agreement
• Advisory agreement
• Investment committee papers
• Transaction records
• Financial statements
• Tax computations

For family offices, key documents may include:

• Family ownership charts
• Trust or foundation documents
• Shareholder records
• Single family office service agreements
• Investment policy statements
• Board minutes
• Asset schedules
• SPE ownership records

Documentation matters because the Inland Revenue Department may look beyond labels.

A structure described as a fund, FIHV or SPE should be supported by records that show how it actually operates.

8. The Proposed Concessions Are Not a Substitute for Source Analysis

Even where a concession is potentially available, Hong Kong tax analysis should not stop there.

Taxpayers may still need to consider the ordinary rules on source of profits, capital versus revenue distinction, deductibility and anti-avoidance.

For example:

• A gain may be capital in nature.
• A profit may be offshore-sourced.
• An expense may or may not be deductible.
• An income stream may fall outside the concession but still require separate analysis.
• A transaction may raise anti-avoidance concerns.

The proposed concessions are one part of the analysis, not the whole analysis.

This is particularly relevant for mixed structures, where some income may qualify and other income may not.

HKWJ Tax Law can assist with a documentation review to identify gaps before a concession is claimed or an Inland Revenue Department enquiry arises.

This article focuses on the proposed changes affecting funds, FIHVs and SPEs. For a broader overview of Hong Kong’s tax concession regimes for funds, family offices, carried interest and other investors, read our main Guide to Hong Kong tax concessions for funds, family offices and investors.

FAQs

How HKWJ Tax Law can help

HKWJ Tax Law can help fund managers, family offices and private wealth structures assess whether the proposed concessions may be relevant.

If your fund, FIHV or SPE structure may be affected by the proposed concessions, contact HKWJ Tax Law for a structure-specific review before relying on any tax position.