Hong Kong, March 2026 – In a strategic move to solidify its position as the premier global wealth hub, the Hong Kong Government has announced a sweeping expansion of its tax concession regimes. The new measures, expected to be passed imminently and applied retroactively, represent the most significant update to the city’s fund tax laws in years.

The News: Performance Fees Go Tax-Free Across All Asset Classes

The “headline” change involves a massive broadening of the Carried Interest Tax Concession. Moving away from the narrow “Private Equity-only” model of the past, the government is extending the 0% tax rate on performance fees (carried interest) to cover virtually all major asset classes.

For asset managers, this means that performance fees earned from the following are now eligible for tax exemption:

• Publicly Listed Shares: No longer restricted to private trades.
• Private Credit and Loans: Targeting the surging private debt market.
• Digital and Virtual Assets: A major win for crypto-focused funds.
• Precious Metals and Commodities: Directly benefiting the DPMS and gold trading sectors.
• Foreign Immovable Property: Expanding the scope for real estate fund managers.

Key Details: Removing the Red Tape

Beyond just expanding asset classes, the 2026 update removes several operational “pain points” that previously discouraged firms from applying for the concession:

1. Elimination of the “Hurdle Rate”: The mandatory minimum return benchmark has been scrapped for tax purposes, allowing managers to follow their commercial fund documents without tax interference.
2. Streamlined Certification: The requirement for HKMA certification is being replaced by a more efficient self-assessment and IRD-led reporting mechanism.
3. Inclusion of “Funds-of-One”: Single-investor structures (frequently used by Family Offices) are now explicitly brought into the tax-exempt fold.
   
   

The “Substantial Activity” Requirement: Are You Compliant?

To prevent “shell” companies from abusing these benefits, the Inland Revenue Department (IRD) has clarified the strict Substantial Activity criteria. To qualify for the 0% rate, a fund manager must demonstrate a genuine economic footprint in Hong Kong.

The Minimum Thresholds:

Anti-Avoidance Measures

It is important to note that these tax breaks come with enhanced “Anti-Round Tripping” rules. If Hong Kong residents hold a beneficial interest of 20% or more in a fund, the IRD may “deem” those profits as taxable unless the fund meets specific “widely held” exemptions.

展望未来

This overhaul signals Hong Kong’s aggressive stance in competing with other financial hubs. By aligning tax incentives with modern investment strategies—including digital assets and private credit—Hong Kong is making a clear bid for the next generation of global capital.

Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice.