Hong Kong is rolling out a plan to exempt private equity funds, hedge funds, and the investment vehicles of ultra-wealthy individuals from taxes on gains from cryptocurrencies, private credit investments, and other assets.
The proposal, detailed in a 20-page document circulated this week. It emphasizes that taxation is “one of the key considerations” for asset managers when choosing where to base their operations, according to a 28 November 2024 report from the Financial Times.
By creating a “conducive environment,” the Hong Kong government aims to attract global investors and crypto businesses.
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Tax Breaks Expanded To Private Credit
The proposal includes expanding tax exemptions to cover private credit, overseas property, and carbon credits. Moreover, a six-week consultation period will allow stakeholders to provide feedback before the changes are finalized.
Hong Kong’s move comes as it competes with regional rival Singapore to attract billionaires, investors, and fund managers. Both cities have introduced lightly taxed fund structures to attract capital.
If implemented, the new exemptions would offer “certainty” to family offices and investors, according to Patrick Yip, vice chair and international tax partner at Deloitte China.
Yip noted that some family offices in Hong Kong allocate up to 20% of their portfolios to digital assets, highlighting the sector’s growing significance.
“This is an important step in boosting Hong Kong’s status as a financial and crypto trading hub,” Yip stated.
BREAKING: After Trump‘s rumoured idea of removing taxes on American crypto such as $ADA $XRP and $HBAR, Hong Kong is planning to exempt funds and investment vehicles from crypto taxes
This could make crypto the asset of choice for Chinese investors, as the Chinese economy is… pic.twitter.com/2S7lplBYu0
— Shawn (@oroogle) November 28, 2024
The timing of Hong Kong’s proposal is also significant as Singapore faces scrutiny over money laundering. Increased due diligence measures in Singapore have reportedly slowed the process of opening family offices. This creates opportunity for Hong Kong to position itself as a more investor-friendly destination.
Hong Kong has been promoting its “open-ended fund company” structure. This allows investors to pool assets and manage multiple sub-funds under a low-tax regime. Over 450 such funds have been launched in Hong Kong, according to government data from October.
Meanwhile, Singapore has seen over 1,000 launches of its variable capital company structure introduced in 2020. This showcases the intense competition between the two financial hubs.
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Hong Kong Aims To Align With Jurisdictions Like Singapore
Darren Bowdern, head of asset management tax for Asia at KPMG, said the proposed tax changes aim to align Hong Kong with jurisdictions like Singapore and Luxembourg, ensuring that funds operating in the city are not taxed.
As reported, Hong Kong’s leading virtual bank, ZA Bank, has unveiled a new service allowing retail users to trade Bitcoin and Ethereum directly using fiat currency.
Meanwhile, Hong Kong’s Securities and Futures Commission (SFC) is set to grant more digital-asset exchange licenses by the end of 2024 following a five-month review of exchanges operating under provisional permits.
Since June, Hong Kong’s SFC has conducted on-site inspections of these platforms and found several practices that fell short of regulatory expectations.
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Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
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