Digital Assets & Virtual Assets
CARF in Hong Kong: What the Crypto-Asset Reporting Framework Means from 2027
Hong Kong has made significant strides in positioning itself as a leading hub for family offices in the Asia-Pacific region. Central to this strategy is the Family Investment Holding Vehicle (FIHV) regime, a profits tax exemption framework specifically designed to attract family offices to Hong Kong by providing tax relief on qualifying investment activities.
This guide explains what the FIHV regime is, who qualifies, what the tax exemption covers, and how family offices should structure their activities to benefit.
Background: Why Hong Kong Introduced the FIHV Regime
The FIHV regime was introduced by the Inland Revenue (Amendment) (Tax Concessions for Family-Owned Investment Holding Vehicles) Ordinance 2023, which came into operation on 19 May 2023. It was designed to level the playing field between Hong Kong and competing family office domiciles (principally Singapore, which had introduced its own family office incentives under Section 13O and 13U of the Singapore Income Tax Act).
The regime reflects a recognition that family offices are a major source of investment activity, talent employment, and financial services demand, and that Hong Kong needed a targeted incentive to compete for this segment of the wealth management market.
What Is a Family Investment Holding Vehicle (FIHV)?
A qualifying FIHV is a family-owned investment holding entity that meets the following conditions:
Family Ownership
The FIHV must be owned or controlled by members of a single family. A “family” is defined broadly to include: an individual and their lineal descendants (children, grandchildren, etc.), the spouse/partner of any such individual or descendant, parents and siblings of the individual, and trusts or companies wholly owned by the family. The key point is that the FIHV must be exclusively family-owned: it cannot have unrelated third-party investors.
Investment Holding Purpose
The FIHV must be established for the purpose of holding investments. It is not a trading company or an operating business. It is an investment vehicle. The types of assets it holds are specified in the regime (qualifying assets: see below).
Single Family Only
Unlike a multi-family office structure (which serves multiple families), the FIHV regime is specifically designed for single family offices. A FIHV serving multiple unrelated families does not qualify.
The Specified Person: The Investment Manager Requirement
A qualifying FIHV must be managed by a “specified person”, an SFC-licensed entity in Hong Kong (holding a Type 9 Asset Management licence) that manages the investments of the FIHV and meets Hong Kong substance requirements.
The specified person requirement is a deliberate policy choice: the regime is designed to generate activity (employment, spending, investment decision-making) in Hong Kong, not merely to provide a tax shelter for passive holding structures.
The specified person can be: a third-party SFC-licensed investment manager engaged to manage the FIHV’s assets, or the family’s own SFC-licensed investment management entity (a single family office investment manager).
Minimum Assets Under Management (AUM)
To qualify for the FIHV regime, the FIHV (and its related FIHVs under common ownership) must have a minimum AUM threshold. The thresholds are:
- Standard threshold: HK$240 million in qualifying assets at the beginning of each year of assessment.
- Reduced threshold: HK$30 million, if the specified person meets minimum local expenditure and employment thresholds in Hong Kong (at least HK$2 million in qualifying expenditure and at least 2 full-time employees in Hong Kong).
The reduced threshold with substance requirements is designed to make the regime accessible to smaller but genuinely active family offices.
Qualifying Assets
The profits tax exemption under the FIHV regime covers income and gains from qualifying transactions in specified qualifying assets, including:
- Shares, stocks, debentures, loan stocks, and bonds
- Units or shares in collective investment schemes (funds, OFCs, unit trusts)
- Futures contracts
- Foreign exchange contracts
- Deposits with financial institutions
- Certificates of deposit
- Exchange-traded commodities
- Foreign currencies
- OTC derivative instruments
Real estate (direct ownership of Hong Kong property) is not a qualifying asset for the purposes of the FIHV regime, and income from Hong Kong property is not covered by the exemption.
What the Exemption Covers
The profits tax exemption covers: profits from qualifying transactions in qualifying assets carried out by or through the specified person, and profits of wholly-owned special purpose vehicles (SPVs) that hold qualifying assets on behalf of the FIHV, where those SPVs are managed by the specified person.
The exemption also covers the profits of the specified person itself from managing the FIHV (i.e., the management fee income earned by the family’s own investment manager is also exempt, subject to conditions).
The FIHV Application Process
The FIHV regime is not a registration or pre-approval system; it is a self-assessment regime. The FIHV claims the exemption in its profits tax return filed with the Inland Revenue Department (IRD). The IRD may audit the claim and request supporting documentation.
Key documentation that a FIHV should maintain includes: evidence of family ownership structure, confirmation of SFC licensing of the specified person, evidence of AUM levels at the beginning of each relevant year of assessment, evidence of qualifying expenditure and employment (if relying on the reduced threshold), and transaction records demonstrating that the profits claimed as exempt relate to qualifying transactions in qualifying assets.
FIHV vs. Existing Fund Exemptions
Hong Kong already has a “fund exemption” regime under the Inland Revenue Ordinance that exempts qualifying investment funds (including OFCs and LPFs) from profits tax on qualifying transactions. The FIHV regime is complementary: it extends similar benefits to family-owned holding vehicles that may not qualify as “funds” under the existing regime (because, for example, they are not managed as collective investment schemes or do not have the required fund structure).
Family offices should consider whether the FIHV regime, the existing fund exemption (via an OFC or LPF structure), or a combination of both is optimal for their specific structure.
Practical Considerations for Family Offices
- Obtain an SFC Type 9 licence: The specified person requirement means that the family’s investment manager must hold an SFC Type 9 licence (or the family must engage a third-party SFC-licensed manager). Obtaining a Type 9 licence takes 3–6 months and involves meeting minimum capital, personnel, and compliance requirements.
- Structure the holding vehicles: Ensure the investment holding vehicles (companies, trusts, OFCs, LPFs) are structured to qualify as FIHVs under the regime.
- Meet the substance requirements: If relying on the reduced AUM threshold, ensure the specified person meets the local expenditure and employment requirements.
- Document everything: The IRD may audit FIHV claims. Robust documentation of ownership structure, AUM, transactions, and the specified person’s activities is essential.
Update: what has changed since 2025
The FIHV thresholds are unchanged. The HK$240 million assets under management requirement, the reduced HK$30 million threshold, the HK$2 million minimum Hong Kong operating expenditure and the requirement for at least two qualified full-time employees all remain as they were. Commentary suggesting these were about to be relaxed has not been borne out. The HK$240 million figure is unchanged, but the way it is measured is not. The Bill replaces “net asset value” with “assets value” and repeals the NAV definition, so loans from holders of a direct beneficial interest are no longer deducted in arriving at the figure. Loans from non-participating persons, such as bank borrowings, still are. For a structure sitting just below the threshold because of shareholder loans, that is the difference between qualifying and not qualifying.
What is changing is the asset scope. The Inland Revenue (Amendment) (Preferential Tax Regimes for Funds, Family-owned Investment Holding Vehicles and Carried Interest) Bill 2026, gazetted on 12 June 2026 and still before the Legislative Council, expands qualifying assets by ten new items: loans and private credit, digital assets, immovable property outside Hong Kong, insurance-linked securities, equity interests in non-corporate entities, precious metals, specified commodities, and emission allowances, emission derivatives and carbon credits. The caps are widely misreported: precious metals are capped at 20% by value of the investment portfolio, commodities at 15% by trade volume, and digital assets are not capped at all. It also removes the 5% incidental transaction threshold and relaxes the treatment of family-owned special purpose entities. The Bill takes effect retrospectively from the year of assessment 2025/26, and the IRD has confirmed that eligible taxpayers may claim on that basis pending enactment.
The New Capital Investment Entrant Scheme has been adjusted three times. Residential property was brought in from 16 October 2024, at a minimum of HK$50 million per transaction and counting only up to HK$10 million toward the HK$30 million threshold. From 1 March 2025 the net asset requirement can be demonstrated over six months rather than two years, family jointly-owned assets count pro rata, and investments may be held through a wholly-owned private company including an FIHV or family-owned SPE. From 1 March 2026 that holding company may be incorporated less than six months before the application. The HK$30 million investment threshold itself is unchanged.
The market has grown. The Government reported more than 3,380 single family offices in Hong Kong at the end of 2025, up around 25% over two years. The original 200-family-office target was met ahead of schedule, and a further 220 are targeted for 2026 to 2028.
The Bill also tightens. It introduces an economic substance requirement on funds themselves under new section 20AMA, being at least two qualified Hong Kong employees and at least HK$2 million of Hong Kong operating expenditure, a mandatory tax reporting mechanism under new sections 20AZ to 20AZE backed by new criminal offences, and an anti-round-tripping rule aimed at loans. All of it applies retrospectively to the year of assessment 2025/26.
We have published a detailed analysis of the Bill: the 2026 Funds, FIHV and Carried Interest Bill, what it gives and what it takes away.
Conclusion
The FIHV regime is a significant and genuinely competitive tax incentive for family offices establishing or operating in Hong Kong. It is well-designed: it targets the right behaviour (genuine investment management activity in Hong Kong), sets achievable thresholds (particularly at the reduced level), and covers a broad range of qualifying assets. For family offices considering their domicile options, the FIHV regime materially enhances Hong Kong’s attractiveness relative to competing jurisdictions.
Alan Wong LLP advises family offices on FIHV regime structuring, SFC licensing, and Hong Kong tax compliance. Contact us to assess whether your family office qualifies for the FIHV regime.
To discuss how this affects your business, please get in touch.
