Fund & REIT Tax Advisory

HK Fund Tax: 0% on Carried Interest, Offshore Fund Exemption, and REIT Transparency — Done Properly

Hong Kong offers some of the world's most fund-friendly tax regimes — the s.20AM offshore fund exemption, a 0% concessionary rate on carried interest, full REIT tax transparency, and the FIHV exemption. But the conditions are strict, the documentation demanding, and the penalties for getting it wrong are severe. We ensure your fund structure is fully optimised and defensible.

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0% Carried interest concessionary rate
s.20AM Offshore fund exemption
HKM+ Total carried interest tax savings delivered

Fund & REIT Tax Advisory

Hong Kong offers some of the world's most fund-friendly tax regimes — the s.20AM offshore fund exemption, a 0% concessionary rate on carried interest, full REIT tax transparency, and the FIHV exemption. But the conditions are strict, the documentation demanding, and the penalties for getting it wrong are severe. We ensure your fund structure is fully optimised and defensible.

⚠️

⚠ s.20AM Warning: Offshore Fund Exemption Is Increasingly Challenged by IRD

The s.20AM exemption requires careful, ongoing management. IRD is increasingly scrutinising whether funds meet all 10 qualifying conditions — particularly whether central management and control is exercised from Hong Kong. Investment committee meetings in HK, decisions by HK-based personnel, and management from HK offices are all triggers that can make the fund HK-resident and destroy the exemption entirely. Funds that have not recently reviewed their compliance position are at risk.

常见困扰

您是否正面临以下税务问题？

s.20AM Central Management & Control Risk

If IRD determines the fund is managed and controlled from HK — because investment committee meetings happen here or key decisions are made by HK-based personnel — the fund loses non-resident status and all exempt gains become taxable.

⚠ Risk: Binary, all-or-nothing — entire fund history becomes taxable

Carried Interest Taxed at 16.5% Instead of 0%

Since 2020, qualifying carried interest is subject to 0% profits tax. But many managers who qualify are not claiming the rate due to inadequate documentation or incorrect analysis — leaving significant tax on the table.

⚠ Risk: Unclaimed concessionary rate → paying 16.5% when 0% is available

Management Fee vs Performance Fee Confusion

Management fees are fully taxable at 16.5%. Performance fees and carried interest have distinct treatment. Misclassifying one as the other triggers IRD adjustments and potential penalties.

⚠ Risk: Misclassification → IRD adjustment with penalty loadings

REIT Distribution Unoptimised for Non-Resident Holders

SFC-authorised REITs are tax-transparent, but distribution waterfalls not designed with DTA access in mind leave significant withholding tax savings unclaimed for institutional holders.

⚠ Risk: Uniform WHT treatment → millions in unnecessary withholding tax
适合对象

适合对象

Private equity fund managers

SFC-licensed PE managers seeking 0% carried interest, s.20AM compliance, and optimal management fee treatment.

Venture capital fund managers

VC managers using Limited Partnership Fund (LPF) structures seeking carried interest planning and s.20AM compliance.

REIT managers

SFC-authorised REIT managers requiring advice on tax transparency, distribution optimisation, and non-resident WHT planning.

Hedge funds & asset managers

Long/short equity, credit, and multi-strategy managers seeking confirmation of trading gains and performance allocation treatment.

Family offices

Single and multi-family offices seeking FIHV exemption for tax-free returns on qualifying assets.

服务范畴

服务范畴

s.20AM Offshore Fund Exemption Review

Comprehensive review of all 10 qualifying conditions under s.20AM, identifying risks and implementing corrective measures.

Non-resident status and CMC analysis, 10-condition checklist, IC protocol review

Carried Interest — 0% Rate Planning

Structure and document carried interest to qualify for the 0% concessionary rate, including prior year amendment claims.

Qualifying fund analysis, SFC licensing, CI register implementation, 3-year amendment window

Fund Management Company Structuring

Optimise FMC tax structure including two-tier profits tax, deductible expenses, and fee classification.

FMC entity design, two-tier access, expenditure maximisation, DIPN 43/51 compliance

REIT Tax Advisory & Distribution Planning

Advisory on REIT tax transparency, deductible distributions under s.26B, and non-resident unit holder WHT optimisation.

REIT transparency analysis, distribution characterisation, DTA claim process

FIHV Family Office Exemption

Structure and apply for the FIHV exemption providing profits tax exemption on qualifying transactions for eligible family offices.

FIHV eligibility, HK0M threshold, application preparation, annual maintenance
服务流程

简单、高效、专业

1

Initial Tax Position Review

Review your fund structure, management company arrangements, and current filing positions. Identify whether carried interest, s.20AM, or FIHV opportunities have been missed.

Week 1 (Free)
2

Technical Analysis & Written Opinion

Comprehensive written opinion covering s.20AM qualifying conditions, carried interest eligibility, FMC two-tier access, REIT structuring, and FIHV eligibility.

Weeks 2-3
3

Implementation & Documentation

Restructure fund agreements, establish carried interest register, prepare FIHV applications, update tax filing procedures, and file amended returns.

Weeks 3-8
4

Annual Tax Compliance

Prepare annual profits tax returns, carried interest disclosures, FIHV filings, and manage all IRD queries and information requests.

Annual
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Carried Interest

PE fund manager — carried interest restructured from 16.5% to 0%

HK.98M 节省
  • SFC-licensed PE manager, HK.4B AUM
  • HKM carried interest taxed at 16.5% for 3 years
  • Amended returns accepted without IRD query — full refund
"TAX.hk identified in our first meeting that we were overpaying carried interest tax by HK0K per year. Three years later, we've recovered HK.98M."
C
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REIT Distribution

REIT manager — distribution waterfall restructured for non-resident holders

HK.4M/yr 节省
  • SFC-authorised REIT, HK.2B NAV
  • 35% institutional non-resident unit holders
  • Distribution characterisation and DTA claim process implemented
"The WHT savings for our institutional holders were immediate and substantial. The distribution policy update was seamless."
R
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常见问题

常见问题

快速解答您的疑问

The fund must not be HK-resident (CMC not in HK); must be a collective investment scheme, company, partnership, or trust; must carry on business through a licensed person in HK; transactions must be qualifying (securities, futures, FX, deposits); profits must arise from qualifying transactions; the fund must not carry on any other business; no HK-resident person holds more than 30% beneficial interest; plus additional conditions for specific entity types. DIPN 43 provides detailed guidance and safe harbours.
An SFC-licensed corporation (Type 4, 6, or 9) that carries out at least two of four qualifying activities in HK. The carry must be paid by a qualifying fund for qualifying transactions (PE/VC-style private investments). The fund manager must maintain a qualifying carried interest register and satisfy DIPN 51 record-keeping requirements. Inadequate documentation results in the 0% rate being denied.
An SFC-authorised REIT is tax-transparent — it does not pay profits tax on income distributed to unit holders as qualifying distributions under s.26B. Distributions are deductible at REIT level, eliminating tax on distributed income. Unit holders are taxed on distributions as property or other income. Non-resident holders may face withholding tax depending on income nature and applicable DTA.
CMC determines where a company is resident for tax purposes. If a fund's CMC is exercised in HK, the fund is HK-resident and cannot qualify for s.20AM. CMC is where the board or IC meets and makes strategic decisions. Risk factors: holding IC meetings in HK, key decisions by HK-based personnel, fund documents not reflecting offshore management. We advise on protocols to ensure CMC is genuinely exercised outside HK.
Management fees (typically 1-2% AUM) are always taxable at standard rates (8.25%/16.5%). Carried interest (typically 20% of profits above hurdle) qualifies for 0% if s.20AN conditions are met. The fund's constitutional documents must properly characterise carried interest as a profit allocation (not a fee). Treating a disguised management fee as carried interest is a known IRD audit target.

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Carried Interest Tax Specialist Fund Managers & General Partners
Hedge Fund Tax Specialist Hedge Fund Managers & Investors
Private Equity Fund Tax Specialist PE Fund Managers & Limited Partners
Bond & Fixed Income Tax Specialist Bond Investors & Fixed Income Fund Managers

本页面仅提供一般信息。如需针对您个人情况的建议，请咨询合资格的香港税务专业人士。