Hong Kong Budget adds fuel to family office drive
The Hong Kong government is eager to tell the world that the city is back in business, setting aside HK$100 million ($12.7 million) over the next three years to woo more family offices to the city.
The measures, announced in the latest annual budget on Wednesday (February 22), also include plans to restart the capital investment entrant scheme that had been suspended since 2015.
The scheme aims to attract talent and new business by granting residency to people who make an investment of over HK$10 million ($1.27 million) in the local asset market, excluding property.
In delivering his first budget under the new administration of Chief Executive John Lee Ka-chiu, Hong Kong Financial Secretary Paul Chan Mo-po said the HK$100 million funding dedicated to the family office promotion campaign will be allocated to InvestHK, a government department that is responsible for attracting foreign direct investment and supporting overseas businesses to expand in the city.
Key projects include a summit at the end of March called “Wealth for Good in Hong Kong”.
The government aims to get at least 200 of the world’s top family offices to set up or expand their operations in the city by 2025.
In an earlier effort, the government's proposed profits tax exemption for qualifying transactions of family‑owned investment holding vehicles managed by single family offices in the city was introduced to the legislature last December.
Upon passage, the tax concession arrangements will be applicable starting April 1, 2022.
NEW CAPITAL, NEW TALENT
“The tax incentives and the new capital investment entrant scheme can bring capital and talent to Hong Kong through family offices establishing their businesses in Hong Kong,” Alice Leung, tax partner at KPMG China, told AsianInvestor.
Although details of the investment residency scheme have not yet been announced, government sources told local media on Wednesday that applicants need to invest more than HK$10 million into Hong Kong’s local capital markets to obtain Hong Kong residency.
Permanent residency, meanwhile, will still be granted to those who stay up to seven years. While the old scheme did not apply to mainland Chinese, the new scheme might include, government sources said.
“I am pleased to see the Hong Kong government's unwavering commitment to strengthening the city's position as a leading hub for asset and wealth management in Asia, with a specific focus on the vital family office industry,” said Kwan Chi-man, group chief executive officer and co-founder of Raffles Family Office.
“These initiatives are particularly important to our global citizen clients, who require a forward-thinking jurisdiction with a sophisticated financial ecosystem to manage their assets and investments,” Kwan told AsianInvestor.
“These measures will undoubtedly create a more conducive environment for the continued growth of the family office industry.”
STRATEGIC TARGETS
Hong Kong will target specific strategic markets to encourage more family offices to open shop in town. These include mainland China, the Middle East, Europe, and Southeast Asia, said Christine Ho, deputy global head of FamilyOfficeHK, in a recent interview with AsianInvestor.
FamilyOfficeHK, launched in 2021, has helped 14 family offices set up in Hong Kong between June and October 2022, according to latest data available.
As part of efforts to increase its European presence, FamilyOfficeHK in October hired a head of Europe in Brussels.
The team also went on roadshows to Europe and the Middle East in the last quarter of 2022 to showcase Hong Kong’s advantages and woo potential clients.
As China enhances its ties with the Middle East - with Chinese President Xi Jinping visiting Saudi Arabia last December, and Hong Kong leader John Lee earlier in February embarking on a weeklong trip to the Middle East for closer business cooperation - interest from family offices there has also been evident.
Still, mainland China - the Greater Bay Area in particular - is viewed as the biggest growth opportunity for Hong Kong’s private wealth management industry.
However, due to Covid restrictions, Hong Kong’s business activities have slowed significantly over the past three years, with many foreign expats leaving.
As a result, Hong Kong has lost some family office business to Singapore, whose number of new family offices, especially set up by mainland China, mushroomed during Covid.
CHINA TIES
Despite this, experts have told AsianInvestor in recent interviews that they do not believe the boom of family office business in Singapore necessarily means that Hong Kong has lost its attraction, especially with Hong Kong’s practical regulatory environment, and its proximity and accessibility to the vast population of mainland China, including those in the Greater Bay Area.
As far as the tax concession measures are concerned, for example, they believe the arrangements are more straightforward and practical in Hong Kong than in Singapore where the qualification for their tax break remains unclear.
“[The new funding] will enable InvestHK to showcase the attractiveness of Hong Kong to family offices across the globe from a legal, regulatory and tax perspective,” Paul Moloney, partner for corporate and securities practice at Mayer Brown, told AsianInvestor.
AsianInvestor will be hosting a Family Office Briefing on March 28 in Hong Kong, which will bring together a select group of family offices. For more details, click here.