Hong Kong has presented a 20-page proposal that seeks to exempt from paying taxes private investment funds, hedge funds and investment vehicles for the ultra-rich in profits obtained from cryptocurrencies, private credit and other assets. This measure aims to consolidate its position as an important offshore financial center and attract large asset managers.
A favorable tax environment to attract investments
The Hong Kong government, recognizing that taxation is a key factor for asset managers when deciding their location, is seeking to create an enabling environment for these operations. The proposed tax breaks would cover assets such as private credit, overseas property and carbon credits, and are open to consultation for six weeks.
Patrick Yip, vice president and international tax partner at Deloitte China, highlighted that this measure would provide “certainty” to family offices and investors, which could strengthen Hong Kong’s status as a financial and Cryptocurrency trading hub.
Competition with Singapore and other jurisdictions
Hong Kong competes directly with Singapore and Luxembourg for the attraction of investment funds. While Singapore has made progress with the introduction of legal structures such as Variable Capital Companies in 2020, Hong Kong is looking to match its appeal with similar structures such as Open-Ended Fund Companies, which already have more than 450 registered funds.
However, recent money laundering controls in Singapore have slowed the opening of family offices, offering a competitive advantage to Hong Kong.
Crypto boom and changes in global dynamics
Interest in Hong Kong is also fueled by the recent Bitcoin rally, linked to the election victory of Donald Trump in the US, who promised to support the crypto industry. This context reinforces Hong Kong’s commitment to position itself as a leader in the cryptocurrency sector.
A step towards global competitiveness
With these tax exemptions, Hong Kong seeks to consolidate itself as a high-level competitor against hubs such as Singapore and Switzerland. According to Darren Bowdern, head of asset management tax at KPMG Asia, these measures would “put Hong Kong on par with Singapore or Luxembourg” in tax terms.
As governments compete to attract global capital, Hong Kong appears to be taking a strategic step towards consolidating its relevance in the financial and crypto world.
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