Hong Kong is looking to become a major financial and crypto hub by proposing tax exemptions for hedge funds, private equity funds, and high-net-worth family offices. This move is aimed at attracting global asset managers and individuals amidst competition with Singapore.
The government’s proposal, detailed in a 20-page document, would exempt taxes on gains from cryptocurrencies, private credit, overseas property, and carbon credits. This initiative, currently under consultation for six weeks, is seen as a way to create a favorable environment for asset managers to base their operations in Hong Kong.
Patrick Yip, vice chair at Deloitte China, believes that this tax exemption will significantly benefit the industry in Hong Kong. He mentioned that family offices in the city allocate a substantial portion of their portfolios to digital assets, highlighting the growing importance of the crypto sector.
The rivalry between Hong Kong and Singapore to attract global investors has intensified, with both cities introducing tax-friendly fund structures. Hong Kong’s proposal is similar to Singapore’s introduction of variable capital companies in 2020, which has seen significant interest from fund managers.
This move by Hong Kong aligns with a larger trend of wealthy Chinese individuals setting up private investment vehicles outside mainland China. The recent tightening of money laundering regulations in Singapore has slowed the establishment of new family offices, giving Hong Kong an opportunity to attract more global capital.
The timing of this tax exemption proposal coincides with renewed optimism in the crypto sector, fueled by President Donald Trump’s recent election victory in the US. Investors are hopeful that Trump’s crypto-friendly stance could benefit the industry, leading to a surge in Bitcoin prices.
UBS CEO Sergio Ermotti previously suggested that Hong Kong could surpass Switzerland as a global wealth management hub, given its recent progress alongside Singapore. As Hong Kong competes with regional rivals, its tax exemptions and legal structures will play a crucial role in attracting global capital and solidifying its position as a leading financial and crypto hub.