On 10 June 2026, the Government released the Legislative Council Brief for the Inland Revenue (Amendment) (Preferential Tax Regimes for Funds, Family-owned Investment Holding Vehicles and Carried Interest) Bill 2026 (the “Bill”). The Bill proposes significant enhancements to Hong Kong’s preferential tax regimes for privately offered funds, family-owned investment holding vehicles (“FIHVs”) managed by eligible single-family offices (“SFOs”) and carried interest arrangements. The proposals aim to strengthen Hong Kong’s competitiveness as an international asset and wealth management centre and further attract global asset managers, institutional investors and family offices to establish and expand their presence in Hong Kong.
Enhancements to the Unified Fund Regime
The Bill proposes significant enhancements to Hong Kong’s Unified Fund Regime (“UFR”) to broaden its scope and strengthen its attractiveness as a fund domicile. The definition of a “fund” will be expanded to cover pension funds, charitable endowment funds, funds wholly owned by governmental entities, central banks and international organisations, as well as certain large fund-of-one structures holding at least HK$240 million of qualifying investments. This is intended to accommodate investment structures commonly used by institutional investors and ultra-high-net-worth individuals.
The scope of qualifying investments will also be significantly expanded to include overseas real estate, loans and private credit investments, digital assets, insurance-linked securities, carbon credits, emission allowances and derivatives, precious metals, and equity interests in non-corporate private entities. This will enable a broader range of alternative investment strategies to benefit from the tax exemption regime.
In addition, the current 5% cap on incidental income will be removed, allowing all profits derived from qualifying investments to qualify for exemption, subject to the relevant conditions. The Bill also proposes enhanced treatment for special purpose entities (“SPEs”), including full tax exemption regardless of the fund’s ownership interest and a wider range of permissible activities. Funds seeking to benefit from the enhanced UFR will generally be required to maintain at least two qualified employees and incur a minimum of HK$2 million of annual operating expenditure in Hong Kong, as well as complying with new tax reporting requirements.
Enhancements to the Family Office Tax Regime
As the FIHV regime was largely modelled on the UFR, many of the proposed enhancements will also apply to eligible family office structures. Key changes include:
Enhancements to the Carried Interest Tax Concession
Removal of HKMA certification requirement
The current requirement for funds to obtain certification from the Hong Kong Monetary Authority will be removed, simplifying the application process and reducing administrative burdens.
Broader scope of qualifying payers
The definition of “qualifying payer” will be expanded to include entities within the same group, regardless of legal form, better reflecting market practice and fund operating models.
Removal of hurdle rate requirement
The existing reference to a hurdle rate in determining eligible carried interest will be deleted. This addresses concerns that certain venture capital, start-up and angel investment funds may not operate with a formal hurdle rate structure.
Expansion beyond private equity funds, and broader definition of qualifying persons and employees
The carried interest concession will be extended to cover managers of all tax-exempt funds, rather than only private equity funds. Eligible carried interest may arise from:
In addition, the proposed amendments expand the scope of qualifying persons for Salaries Tax exemption to include employees directly involved in the fund’s management activities and different carried interest distribution arrangements, including relevant amounts paid by the fund directly or through other carry vehicles and personal investment entities.
The Bill represents one of the most significant enhancements to Hong Kong’s asset and wealth management tax framework in recent years and reinforces the Government’s commitment to strengthening Hong Kong’s position as a leading international asset and wealth management centre.
Key developments include the expansion of qualifying investments to cover private credit, digital assets and other alternative asset classes, the inclusion of certain fund-of-one structures, and the broadening of the carried interest concession beyond traditional private equity arrangements. These changes are expected to increase the attractiveness of Hong Kong’s tax regimes for fund managers, family offices, institutional investors and private capital sponsors, while supporting the continued growth of alternative investments and private markets.
Businesses and investors should review their existing and proposed structures to assess whether they may benefit from the enhanced regimes and associated tax concessions once the legislation is enacted.
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
James Clemence
Asia Pacific CEO
Bruce Lee
Hong Kong SAR Territory Leader
Adam Chiu
Partner
Steven Lim
Partner
Simply follow our Vialto Alerts page on LinkedIn and posts will be displayed on your feed. To ensure you don’t miss one, once you’re on our LinkedIn page, click on the bell icon under the banner image to manage your notifications.
Further information on Vialto can be found here: www.vialtopartners.com
Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.
© 2026 Vialto Partners. All rights reserved.