Part one: Spotlight on Asia – 4 reasons to set up a family office in Hong Kong
The increase in worldwide wealth over the last two decades has led to the growth in the number of established family offices. Their popularity has gained popularity over the years due to their ability to centralise and streamline the management of complex family wealth while ensuring privacy, continuity, and personalisation. The geographical dispersal of families and the need to preserve wealth within families have also contributed to the rise in family offices.
The Asia-Pacific (APAC) region, in particular, has gained popularity in the establishment of family offices over the years due to its economic growth, strategic location of some of the world's leading financial centres, such as Hong Kong and Singapore and strong government support. Ocorian’s Novia Lu, APAC Business Development Director and Sharon Yam, Regional Head of Asia Pacific explore four benefits of establishing family offices in Hong Kong and how Ocorian can help family offices by applying intellectual solutions to problems.
Family office APAC trends over the years
The APAC region has experienced significant growth in the last decade, with its weight in the world GDP rising from 27% in 2000 to 37% by 2021. It is predicted to increase to 42% by 2024,?according to the International Monetary Fund. The growth has mainly been driven by the expansion of China and India, and has been supported by strong consumer spending, infrastructure development, and technological advancements. The Asia-Pacific region covers a wide geographical area, with diverse landscapes, societies, and cultures, and is home to more than half of the world's population.
The role of Family Offices
Family offices are private wealth management firms established by ultra-high-net-worth families to manage their financial assets and cater to their unique needs. A family office provides a range of detailed services from bookkeeping to staff management and payroll to charitable giving and wealth transfer planning.?
As the number of ultra-high-net-worth families increases, so does the need to preserve their wealth. Their ability to provide comprehensive, tailored and hands-off solutions are attractive to those who need them most. The complexity of wealth planning and needs requires the expertise of third-party providers. According to Our Family Offices and the role of third-party service providers report, 91% of respondents predict an increase in the outsourcing of key services, demonstrating that third-party providers are and will still be needed.?
Family Offices in Hong Kong
Over the years, Hong Kong has gained popularity as a destination for family offices. The city’s geographical location, high levels of government support and industry expertise have contributed to its growth. Continuous initiatives and its position as a gateway between Mainland China and the Asia economies have further solidified its status as a leading location for family offices. Let’s explore four reasons to set up a family office in Hong Kong.
What are the key benefits of setting up a family office in Hong Kong?
1. Low tax
Hong Kong has become an attractive jurisdiction for family offices because of its approach to tax. Introduced in early 2022, a new tax regime provides tax concessions for eligible family offices that manage family-owned investment holding vehicles.
Further to the tax concessions, Hong Kong has no sales tax, value-added tax, capital gains tax and does not withhold tax on dividends and interests from a Hong Kong entity to a resident or non-resident. The simple tax system in Hong Kong is incredibly attractive to investors and family offices who use a corporate structure.
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2. Business-friendly jurisdiction
In 2020, The World Bank ranked Hong Kong as the third most business-friendly jurisdiction out of 190 jurisdictions. The criteria to determine business-friendliness include:
In an effort to restore business confidence and attract wealthy family offices from around the world, the Hong Kong Government aims to increase the number of family offices from 400 to 600 by 2025 through new tax incentives and a dedicated family office service provider network, called The Network.
3. Strategic hub in Asia
Hong Kong has strategically positioned itself as a gateway to the dynamic economy of mainland China. This can be seen through sophisticated transport routes that connect Hong Kong to China and the rest of Asia, making the jurisdiction a central hub for global and regional business. The ease with which European countries can invest in China, through Hong Kong, also makes Hong Kong an attractive jurisdiction to invest in.
4. Strong financial hub
According to Deloitte’s International Wealth Management Centre Rankings, Hong Kong has consistently ranked in the top three in overall competitiveness among the world's leading wealth management centres since 2013. The jurisdiction is also home to nearly 80 of the world’s 100 largest banks and 70 of the top 100 global asset managers. It is considered the best hub for international fund managers, according to the Wall Street Journal.
How can Ocorian help?
Ocorian has a wealth of experience and offers a full suite of tailored of corporate, funds and fiduciary services across a network of 20 wholly-owned offices spanning all the world’s financial hubs, including Hong Kong. In 2020, Ocorian merged with Estera to form a leader in corporate and fiduciary services, fund administration and capital markets.
Our ‘Family Offices and the role of third party service providers’ report, which was published in 2023, asked more than 130 family offices whether they predict an increase in client risk appetite over the next 12 months. 88% of respondents said they do, and we are ready to take care of the details, so you can enjoy the big picture.
Our clients are at the heart of what we do. We are able to offer enhanced and expert services to our clients, wherever they are located.
This article was originally published on 4 reasons to set up a family office in Hong Kong.