Hong Kong Family Office Tax Incentives: The FIHV Regime Explained

Hong Kong has made significant strides in positioning itself as a leading hub for family offices in the Asia-Pacific region. Central to this strategy is the Family Investment Holding Vehicle (FIHV) regime — a profits tax exemption framework specifically designed to attract family offices to Hong Kong by providing tax relief on qualifying investment activities.

This guide explains what the FIHV regime is, who qualifies, what the tax exemption covers, and how family offices should structure their activities to benefit.

Background: Why Hong Kong Introduced the FIHV Regime

The FIHV regime was introduced by the Inland Revenue (Amendment) (Tax Concessions for Family-Owned Investment Holding Vehicles) Ordinance 2023, which came into operation on 19 May 2023. It was designed to level the playing field between Hong Kong and competing family office domiciles (principally Singapore, which had introduced its own family office incentives under Section 13O and 13U of the Singapore Income Tax Act).

The regime reflects a recognition that family offices are a major source of investment activity, talent employment, and financial services demand, and that Hong Kong needed a targeted incentive to compete for this segment of the wealth management market.

What Is a Family Investment Holding Vehicle (FIHV)?

A qualifying FIHV is a family-owned investment holding entity that meets the following conditions:

Family Ownership

The FIHV must be owned or controlled by members of a single family. A “family” is defined broadly to include: an individual and their lineal descendants (children, grandchildren, etc.), the spouse/partner of any such individual or descendant, parents and siblings of the individual, and trusts or companies wholly owned by the family. The key point is that the FIHV must be exclusively family-owned — it cannot have unrelated third-party investors.

Investment Holding Purpose

The FIHV must be established for the purpose of holding investments. It is not a trading company or an operating business — it is an investment vehicle. The types of assets it holds are specified in the regime (qualifying assets: see below).

Single Family Only

Unlike a multi-family office structure (which serves multiple families), the FIHV regime is specifically designed for single family offices. A FIHV serving multiple unrelated families does not qualify.

The Specified Person: The Investment Manager Requirement

A qualifying FIHV must be managed by a “specified person” — an SFC-licensed entity in Hong Kong (holding a Type 9 Asset Management licence) that manages the investments of the FIHV and meets Hong Kong substance requirements.

The specified person requirement is a deliberate policy choice: the regime is designed to generate activity (employment, spending, investment decision-making) in Hong Kong, not merely to provide a tax shelter for passive holding structures.

The specified person can be: a third-party SFC-licensed investment manager engaged to manage the FIHV’s assets, or the family’s own SFC-licensed investment management entity (a single family office investment manager).

Minimum Assets Under Management (AUM)

To qualify for the FIHV regime, the FIHV (and its related FIHVs under common ownership) must have a minimum AUM threshold. The thresholds are:

• Standard threshold: HK$240 million in qualifying assets at the beginning of each year of assessment.
• Reduced threshold: HK$30 million, if the specified person meets minimum local expenditure and employment thresholds in Hong Kong (at least HK$2 million in qualifying expenditure and at least 2 full-time employees in Hong Kong).

The reduced threshold with substance requirements is designed to make the regime accessible to smaller but genuinely active family offices.

Qualifying Assets

The profits tax exemption under the FIHV regime covers income and gains from qualifying transactions in specified qualifying assets, including:

• Shares, stocks, debentures, loan stocks, and bonds
• Units or shares in collective investment schemes (funds, OFCs, unit trusts)
• Futures contracts
• Foreign exchange contracts
• Deposits with financial institutions
• Certificates of deposit
• Exchange-traded commodities
• Foreign currencies
• OTC derivative instruments

Real estate (direct ownership of Hong Kong property) is not a qualifying asset for the purposes of the FIHV regime, and income from Hong Kong property is not covered by the exemption.

What the Exemption Covers

The profits tax exemption covers: profits from qualifying transactions in qualifying assets carried out by or through the specified person, and profits of wholly-owned special purpose vehicles (SPVs) that hold qualifying assets on behalf of the FIHV, where those SPVs are managed by the specified person.

The exemption also covers the profits of the specified person itself from managing the FIHV — i.e., the management fee income earned by the family’s own investment manager is also exempt, subject to conditions.

The FIHV Application Process

The FIHV regime is not a registration or pre-approval system — it is a self-assessment regime. The FIHV claims the exemption in its profits tax return filed with the Inland Revenue Department (IRD). The IRD may audit the claim and request supporting documentation.

Key documentation that a FIHV should maintain includes: evidence of family ownership structure, confirmation of SFC licensing of the specified person, evidence of AUM levels at the beginning of each relevant year of assessment, evidence of qualifying expenditure and employment (if relying on the reduced threshold), and transaction records demonstrating that the profits claimed as exempt relate to qualifying transactions in qualifying assets.

FIHV vs. Existing Fund Exemptions

Hong Kong already has a “fund exemption” regime under the Inland Revenue Ordinance that exempts qualifying investment funds (including OFCs and LPFs) from profits tax on qualifying transactions. The FIHV regime is complementary: it extends similar benefits to family-owned holding vehicles that may not qualify as “funds” under the existing regime (because, for example, they are not managed as collective investment schemes or do not have the required fund structure).

Family offices should consider whether the FIHV regime, the existing fund exemption (via an OFC or LPF structure), or a combination of both is optimal for their specific structure.

Practical Considerations for Family Offices

• Obtain an SFC Type 9 licence: The specified person requirement means that the family’s investment manager must hold an SFC Type 9 licence (or the family must engage a third-party SFC-licensed manager). Obtaining a Type 9 licence takes 3–6 months and involves meeting minimum capital, personnel, and compliance requirements.
• Structure the holding vehicles: Ensure the investment holding vehicles (companies, trusts, OFCs, LPFs) are structured to qualify as FIHVs under the regime.
• Meet the substance requirements: If relying on the reduced AUM threshold, ensure the specified person meets the local expenditure and employment requirements.
• Document everything: The IRD may audit FIHV claims. Robust documentation of ownership structure, AUM, transactions, and the specified person’s activities is essential.

Conclusion

The FIHV regime is a significant and genuinely competitive tax incentive for family offices establishing or operating in Hong Kong. It is well-designed: it targets the right behaviour (genuine investment management activity in Hong Kong), sets achievable thresholds (particularly at the reduced level), and covers a broad range of qualifying assets. For family offices considering their domicile options, the FIHV regime materially enhances Hong Kong’s attractiveness relative to competing jurisdictions.

Alan Wong LLP advises family offices on FIHV regime structuring, SFC licensing, and Hong Kong tax compliance. Contact us to assess whether your family office qualifies for the FIHV regime.