(Yicai) June 26 -- Hong Kong is strengthening its preferential tax policies for family offices and expects strict compliance with existing regulations, a senior official said in response to reports alleging money laundering or illegal fundraising involving money handlers for ultra-high-net-worth individuals.

The special administrative region has consistently supported legal and compliant family offices conducting business in Hong Kong and respects the private financial arrangements of single-family offices, Joseph Chan, undersecretary for financial services and the treasury, said at a government meeting yesterday.

Going forward, Hong Kong will enhance the preferential tax regime for funds, single-family offices, and carried interest to attract more family offices and high-net-worth individuals to choose Hong Kong as their wealth management hub, Chan added.

However, recent reports have raised concerns about the existence of fake family offices in Hong Kong, some allegedly involved in money laundering or illegal fundraising. In response, members of the Legislative Council, Hong Kong’s main law-making body, questioned officials about family offices yesterday.

In recent years, Hong Kong has attracted more private wealth managers to establish a presence in the international financial center, aiming to become a global hub for family offices -- private organizations managing a minimum asset scale of HKD240 million (USD30.6 million). As of December 2023, the SAR was home to around 2,700 single-family offices.

Chan added that the SAR has introduced measures to prevent tax avoidance. For example, business entities operating for general commercial or industrial purposes are ineligible for tax incentives, a move designed to prevent misuse. Chan also emphasized that professionals must conduct due diligence in accordance with relevant laws and guidelines when providing services to family offices.

In late May, Chan stated that the regional government plans to optimize tax concessions by expanding the types of transactions eligible for tax benefits for funds and single-family offices, including carbon credits and virtual assets, as well as carried interest distributions by private equity funds. A detailed plan is expected to be formulated within this year and, if approved by the Legislative Council, will take effect in the current financial year.

Based on a 2022 target, Hong Kong aims to assist at least 200 family offices in establishing or expanding their businesses in the region by the end of this year. Chan said yesterday that the plan is on track for completion.

Editor: Emmi Laine