Hong Kong is expected to move quickly to approve new tax incentives for alternative investment managers with the proposed legislation expected to pass through the Legislative Council ‘soon’, according to a report by the South China Morning Posts citing comment from Sandy Fung, KPMG China’s partner for tax and alternative investments.
Fung said the measures could encourage international funds and related professionals to establish operations in Hong Kong, further supporting the city’s ambitions as a leading centre for asset management.
The proposed changes would provide tax relief on certain performance-linked income earned by qualifying private equity and venture capital fund entities, while also exempting eligible fund managers from salaries tax on performance-related bonuses. The measures would apply retrospectively from April 2025, subject to specific conditions.
The Inland Revenue (Amendment) (Preferential Tax Regimes for Funds, Family-owned Investment Holding Vehicles and Carried Interest) Bill 2026 was gazetted in June and received its second reading in the Legislative Council on 24 June.
Fung described the proposed framework as a significant improvement in the clarity of Hong Kong’s tax treatment of carried interest and performance-linked compensation.
The proposal has already generated interest among overseas investment firms, with KPMG reporting a surge in inquiries from managers considering establishing a presence in Hong Kong or returning to the city.
The measures could also appeal to mainland Chinese fund managers seeking to expand internationally, according to Fung.
Under the proposal, Hong Kong would also introduce a reporting mechanism to collect information from funds outside the city, including details of their investment strategies and assets, to help policymakers assess demand and refine the regime.
The initiative comes as Hong Kong seeks to build on strong growth in its asset and wealth management industry. Assets under management and wealth under management in the city reached a record HK$42.2tn ($5.4tn) last year, according to data from the Securities and Futures Commission.
Hong Kong currently applies a standard salaries tax rate of 15%, while the profits tax rate for companies is 16.5%.
