Navigating the SFO Schedule 5 intra-group carve-out, SFO vs MFO regulatory boundaries, and Section 20AM family wealth tax concessions.
Executive Regulatory Summary
Hong Kong has established itself as the premier family office hub in Asia. A primary attraction is that a genuine Single Family Office (SFO) managing purely proprietary family wealth can operate without an SFC licence, supported by a 0% concessionary profits tax regime.
Under Schedule 5 of the SFO, a corporation is not regarded as carrying on asset management (Type 9) if it provides such services solely to its wholly owned subsidiaries, its holding company which holds all its issued shares, or other wholly owned subsidiaries of that holding company.
In September 2020, the SFC published a Circular confirming that where an SFO is established as an independent vehicle wholly owned by a single family and manages assets solely for family members and qualifying family vehicles, it does not provide services to third parties and falls outside the licensing regime.
If a family office pools assets from unrelated families or offers investment services to third parties for a management fee, it functions as an MFO and must obtain an SFC Type 9 licence.
Under the Inland Revenue (Amendment) (Tax Concessions for Family-owned Investment Holding Vehicles) Ordinance 2023, eligible Family-owned Investment Holding Vehicles (FIHVs) managed by an SFO enjoy a 0% concessionary profits tax rate on qualifying transactions.
| Statutory Requirement | Statutory Benchmark | Verification Standard |
|---|---|---|
| Minimum Net Asset Value (NAV) | HK$240,000,000 (approx. US$30M) | Aggregated across up to 5 family-owned FIHVs |
| Family Ownership Threshold | At least 95% beneficial ownership | Held directly or indirectly by family members |
| Substantial Economic Substance | At least 2 full-time qualified staff in Hong Kong | Operating local office and verifiable management functions |
| Minimum Local Operating Expenditure | At least HK$2,000,000 annually | Audited annual accounting and administration spend |
Family offices can accidentally trigger licensing requirements through structural mistakes: charging non-family executives profit shares, managing assets for distantly related associates not meeting the statutory definition of family, or distributing third-party investment products.
No. If the SFO operates strictly within statutory carve-outs and does not conduct regulated activities for third parties, no formal notification or application to the SFC is required.
Yes. An exempt SFO managing proprietary family capital may invest in public equities, private equity, venture debt, real estate, and digital assets without restriction.
The Inland Revenue Ordinance defines family members broadly, encompassing spouses, direct lineal ancestors, direct lineal descendants, siblings, and nephews/nieces.