The Government of the Hong Kong Special Administrative Region (the Government) has recently accelerated the legislation and implementation of tax concessions across several sectors. On 12 June 2026, it gazetted two tax amendment bills: one covering tax concessions for shipping-related activities and physical commodity trading, and the other enhancing the preferential tax regimes for funds, family-owned investment holding vehicles and carried interest. The simultaneous gazettal of two major tax bills was relatively uncommon in Hong Kong in recent years. It marked a concentrated phase of legislative implementation for tax measures developed over the preceding year or more in the areas of maritime services, wealth management and commodity trading.

Prior to this, the Action Plan to Promote the Development of Corporate Treasury Centres (CTCs) in Hong Kong had been released on 9 June, proposals to enhance tax deductions for intellectual property (IP) acquisition expenditure had been submitted to the Legislative Council (LegCo) for discussion in May, and research on tax concessions for gold trading and settlement had been included in the 2026/27 Budget.

Further legislation and consultation will continue to advance in the coming months. Adjustments over the past six months cover multiple areas, including shipping, commodity trading, funds and family offices, corporate treasury centres, IP and the gold market. Most measures remain in the legislative or consultation process. 

This article summarises these recent developments in Hong Kong’s tax concessionary regimes and their expected implementation timeline. 

Adjustments to Shipping Tax Concessions and Half-rate Tax Concession for Physical Commodity Trading

Before this, Hong Kong had introduced dedicated tax concessions for certain shipping activities in stages:

  • The ship leasing tax concession has been in place since 2020. Qualifying ship lessors are subject to a 0% tax rate, while qualifying ship leasing managers are subject to a 0% or 8.25% tax rate;
  • Qualifying profits from marine insurance (since 2021) and ship agency, ship management and ship broking (since 2022) are generally subject to an 8.25% tax rate.

However, qualifying ship leasing activities were previously subject to restrictions on the identity of the lessee and the minimum lease term, while physical commodity trading had not previously benefited from a dedicated tax concession, with the relevant profits taxed at the standard rate of 16.5%.

In March 2026, the Inland Revenue Department (IRD) published the first relevant advance ruling case (No. 78, ruling date: 12 November 2025). The applicant was ruled to be a qualifying ship lessor, and its qualifying leasing profits were subject to a 0% tax rate (covering five years of assessment from 2024/25 to 2028/29). It was also confirmed that a special purpose entity could satisfy the substantial activities requirement through an intra-group outsourcing arrangement.

This Bill enhances the existing tax concessions for shipping-related activities and, for the first time, introduces a half-rate profits tax concession for physical commodity trading. The relevant measures take retrospective effect from the year of assessment 2025/26.

1. Four adjustments to shipping concessions:

  • Relaxation of the definition of ship leasing. The Bill removes the requirement that an operating lease or finance lease must have a term exceeding one year, and expands the scope of lessees under qualifying ship leasing and ship leasing management activities from “a ship lessor, ship leasing manager or ship operator” to “any other person”.
  • Introduction of an additional 15% concessionary tax rate option. For multinational enterprise (MNE) groups within the scope of base erosion and profit shifting (BEPS) 2.0, the Bill introduces an optional 15% concessionary tax rate that may be elected annually, while retaining the existing rates, including the 0% rate. Although the 0% rate is nominally more favourable, it may give rise to top-up tax under the global minimum tax framework. The 15% option may reduce the complexity and compliance costs associated with top-up tax calculations and is subject to substantially lower substantial activities requirements. For example, a qualifying ship lessor electing for the 15% rate must employ at least one full-time employee in Hong Kong and incur annual operating expenditure of at least HK$3.9 million. Separately, qualifying international shipping income may be excluded from global anti-base erosion (GloBE) income under the GloBE Rules, in which case the 0% rate would not necessarily give rise to top-up tax. Enterprises should therefore assess whether the international shipping income exclusion applies before making an election.
  • Introduction of a one-off tax deduction for ship acquisition expenditure. Under the existing regime, a qualifying ship lessor carrying on an operating lease calculates assessable profits at 20% of lease income (that is, the “20% tax base concession”) and is not entitled to deduct the acquisition cost. The new proposal replaces the 20% tax base concession with a one-off tax deduction for ship acquisition expenditure.
  • Expansion of the scope of interest deductions. Interest paid by a ship lessor to an unassociated financier (including a non-financial institution outside Hong Kong) for acquiring a ship, and interest paid to an associated financier outside Hong Kong that is subject to a similar tax on that interest income, will be included within the scope of deduction.

2. Half-rate tax concession for physical commodity trading

This is the first dedicated tax concession that Hong Kong has provided to physical commodity traders. The profits tax rate for a qualifying trader is halved from the standard rate of 16.5% to 8.25%; an enterprise in scope of BEPS 2.0 may elect to apply the alternative 15% rate.

  • Scope: A total of 55 physical commodities, divided into three major categories: energy and industrial products, agricultural products, and metal and mineral products. Qualifying trading activities must involve purchases and sales that result in physical delivery (excluding wholesale and retail activities); procurement for own use is not included.
  • Conditions for a qualifying trader:

1. Central management and control is exercised in Hong Kong;

2. Annual income from qualifying trading activities is not less than HK$700 million;

3. It carries on only qualifying trading activities, or satisfies the safe harbour rule (at least 75% of total profits and total assets are respectively composed of profits and assets from physical commodity trading), or is determined by the Commissioner of Inland Revenue to be a qualifying trader;

4. The trading activities are carried on in Hong Kong, the relevant purchase and sale contracts are concluded in Hong Kong, and the activities are not carried on through a permanent establishment outside Hong Kong;

5. It satisfies economic substance requirements, with different requirements applying according to the tax rate elected:

- If the 8.25% half-rate concession is elected, the enterprise must employ at least three full-time employees in Hong Kong and incur annual operating expenditure in Hong Kong of at least HK$3 million;

- If the 15% tax rate is elected (applicable to multinational enterprise groups covered by the BEPS 2.0 framework), the economic substance requirements are correspondingly reduced: the enterprise must employ at least one full-time employee in Hong Kong and incur annual operating expenditure in Hong Kong of at least HK$1 million;

6. For relevant expenditure involving the use of specified maritime services, a commodity trader must use maritime services provided by Hong Kong service providers in a prescribed proportion. If only one maritime service is used, the expenditure must reach 30%; if more than one is used, the aggregate expenditure must reach 30%, or expenditure on any one service must reach 50%. The above “specified maritime services” comprise 10 items: ship leasing, ship leasing management, ship agency, ship management, ship broking, chartering or booking of freight space, ship repair, ship towage, maritime legal services (the maritime contract must specify Hong Kong as the place of arbitration for maritime disputes), and cargo transport insurance.

  • Anti-avoidance arrangements: Associated transactions are subject to the arm’s length principle; arrangements whose main purpose is to obtain a tax benefit as their main purpose will be denied the concession.

The Bill was introduced into the LegCo for its First Reading on 24 June. The Transport and Logistics Bureau stated that, since shipping tax concessions were introduced in 2020, the number of qualifying ship lessors benefiting from them increased fivefold from the years of assessment 2020/21 to 2023/24. Given that commodity traders are a core customer group for Hong Kong’s maritime services, the simultaneous introduction of a tax concession for commodity trading aims to attract more commodity trading institutions to establish a presence in Hong Kong and drive the development of the maritime services industry.

Funds, Family-owned Investment Holding Vehicles and Carried Interest: Simultaneous Adjustments to Three Tax Regimes

Before this, Hong Kong had established preferential tax regimes for these three categories over a number of years:

  • Qualifying privately offered funds may enjoy a profits tax exemption on profits derived from qualifying transactions under the unified fund exemption (UFE) regime;
  • Family-owned investment holding vehicles and family-owned special purpose entities managed by an eligible single family office are exempt from tax on profits from transactions in specified assets under Schedule 16C (the relevant ordinance was gazetted and came into operation in May 2023, with the concession applying retrospectively to years of assessment commencing on or after 1 April 2022);
  • Qualifying carried interest received by qualifying persons (such as investment management companies) is charged to profits tax at 0%, while the relevant sums received by qualifying employees are fully exempt from salaries tax.

The tax concession for family-owned investment holding vehicles has passed the OECD peer review and has no expiry date.

According to market research commissioned by Invest Hong Kong, Hong Kong had approximately 3,384 single family offices as at the end of 2025, an increase of more than 600 from approximately 2,700 at the end of 2023. The Bill gazetted on 12 June 2026 represents a large-scale adjustment to this regime.

This Bill enhances the three preferential tax regimes for privately offered funds, family-owned investment holding vehicles (FIHVs) managed by eligible single family offices, and carried interest. The Bill completed its First Reading in the LegCo on 24 June. In a response on 12 August, the Financial Services and the Treasury Bureau (FSTB) stated that the Bills Committee had completed its clause-by-clause examination and that the Government aimed to resume the Second Reading debate in the second half of the year. If passed, the Bill will apply retrospectively from the year of assessment 2025/26.

1. Expansion of the definition of “fund”

The Bill proposes to bring “funds-of-one” arrangements within scope, provided that the value of qualifying investments under management is not less than HK$240 million and the investor does not have day-to-day control over the management of the property concerned.

The expanded definition will also cover retirement funds, endowment funds of tax-exempt charitable bodies in Hong Kong, and funds whose sole investor is a Hong Kong government entity, central bank or international organisation.

2. Expansion of the scope of qualifying investments

Qualifying investments under the UFE regime will be expanded to include the following new asset classes under Schedule 16C (using the same list as family-owned investment holding vehicles):

Loans (private credit), digital assets, emission allowance derivatives, emission allowances and carbon credits, equity interests in private entities that are not legal persons (such as partnerships), immovable property outside Hong Kong, insurance-linked securities, precious metals (not exceeding 20% of the value of the investment portfolio), and specified commodities relating to an over-the-counter derivative product or futures contract in respect of the commodity. 

Asset classes such as private credit, digital assets and carbon-related instruments are therefore included within the tax-exemption scope for the first time.

3. Removal of the 5% threshold for incidental transactions

Under the existing regime, income from incidental transactions within a fund’s tax-exempt profits is subject to a 5% limit, which has long affected bond and fixed-income funds whose income is mainly interest. The Bill removes this threshold and the distinction between “qualifying transactions” and “incidental transactions”.

4. Adjustments to the definition of “minimum asset threshold”

The minimum asset threshold is changed from the concept of “net asset value” to “asset value”, so shareholder loans are no longer deducted from asset value; a family-owned special purpose entity (FSPE), even if only partly held by the family, may obtain tax-exempt treatment for all of its income; the new asset classes in Schedule 16C use the same list as the UFE regime (see (2) above); the anti-round tripping provisions are refined in parallel to attribute profits to specified entities such as Hong Kong lenders and insurance companies; and a new Schedule 16L is introduced to exclude from the tax-exemption scope income from shares in companies derived from the sale, purchase or development of Hong Kong property.

5. Adjustments to the carried interest tax regime

The scope of eligible carried interest is expanded from returns arising from private equity transactions to returns arising from all asset classes under Schedule 16C, including dividends, offshore income and taxable income. The definition of a qualifying employee is expanded to include an employee of an entity within the same group as a qualifying person. Eligible carried interest may also be paid directly by a fund or received through a vehicle held by an employee. The existing monetary thresholds and the fund certification requirement administered by the Hong Kong Monetary Authority (HKMA) will be removed. 

Performance remuneration (performance fees) of hedge funds is thereby included within the scope of the concession for the first time: the relevant sums are charged to profits tax at 0% at the level of the investment management company (the qualifying person), while the related employment income of qualifying employees is fully exempt from salaries tax (previously taxed at progressive salaries tax rates or the standard rate).

It should also be noted that a proprietary trading business conducted with its own capital does not fall within the definition of “fund”, and the relevant remuneration is not covered by the concession.

6. Supporting measures

A tax reporting mechanism and economic substance requirements will be introduced under the UFE regime, aligning it with the tax concession regime for family-owned investment holding vehicles.

On the date of gazettal (12 June), the IRD announced transitional administrative arrangements under which qualifying taxpayers may file their tax returns for the year of assessment 2025/26 in accordance with the proposed regime. The HKMA subsequently announced on 26 June that it had suspended acceptance of new fund certification applications (the certification was originally a prerequisite for the carried interest concession and the Bill proposes to remove it).

Corporate Treasury Centres (CTCs): Consultation on a Two-tier Regime

Hong Kong has offered a half-rate profits tax concession for qualifying corporate treasury centres (CTCs) since 2016. Under the existing regime, qualifying profits from specified treasury activities, including intra-group financing, are generally taxed at 8.25% instead of the standard corporate rate of 16.5%. However, a CTC must satisfy the dedicated CTC condition or the 75% safe harbour rule. Interest deductions are also subject to a subject-to-tax condition and an anti-tax arbitrage rule. These requirements have limited the regime’s practical accessibility for some groups. 

Unlike the two foregoing tax Bills, which proceeded directly into the legislative process, this tax reform adopts a gradual approach of first releasing an action plan and then conducting a public consultation, comprehensively upgrading the existing regime that has been implemented for ten years.

On 9 June 2026, the FSTB, together with the IRD, the HKMA and Invest Hong Kong, announced the Action Plan to Promote the Development of Corporate Treasury Centres in Hong Kong at the Corporate Treasury Centre Forum, proposing a “4T” framework:

Tax Revamp 
Tax Agreements 
Targeted Promotion 
Talent & Dialogue

The Tax Revamp component proposes introducing a tiered regime, enhancing the existing tax concession measures and establishing a pre-approval mechanism. Once approved, an enterprise’s treasury centre and associated enterprises may enjoy more tax concessions, greater tax certainty and greater compliance flexibility.

On 27 July, the Government launched a public consultation on a proposed two-tier tax concession regime. The consultation period ran until 4 September:

Tier 1 (for all qualifying corporate treasury centres)

Building on the existing regime, interest deduction deferral would be permitted: interest paid to a non-Hong Kong associated enterprise may, if that associated enterprise is not required to pay tax on the interest income in the current period, be deferred for deduction until the year in which it becomes subject to tax; the scope of interest deductions would be expanded to cover a broader range of corporations carrying on corporate treasury activities; and the substantial activities requirements, benchmarks for intra-group financing businesses, and corporate treasury transactions would be clarified.

Tier 2 (pre-approved corporate treasury centres, valid for five years and renewable)

The dedicated corporate treasury centre condition and the 75% safe harbour rule would be removed, while the central management and control requirement would be relaxed to a “normal management or control” test. A pre-approved Hong Kong associated company could enjoy a 50% profits tax concession on qualifying interest income received from a pre-approved CTC. The subject-to-tax condition for qualifying interest expenditure and the anti-tax arbitrage rule would also be removed. However, the deduction for the relevant interest expenditure would generally be capped at 30% of the payer’s tax EBITDA. Proposed eligibility conditions include annual group turnover of at least HK$100 million; treasury activities serving at least six associated companies, including at least one outside Hong Kong; annual operating expenditure in Hong Kong of at least HK$4 million; at least two professional employees; and a principal bank account maintained with an authorised institution in Hong Kong.

According to the timetable announced by the Government, the consultation will be completed and an administrative clarification document on the existing regime will be issued in 2026. Legislative amendment proposals are planned for submission to the LegCo in the first half of 2027.

According to the Government, this round of tax reform aims to attract Mainland enterprises expanding overseas and multinational groups to locate their regional treasury management functions in Hong Kong, leveraging Hong Kong’s position as an offshore Renminbi hub and its financial ecosystem, and linking these functions with the development of regional headquarters and supply chain management centres.

Tax Deductions for IP Acquisition Expenditure: Enhancement Proposals Pending Legislation

Hong Kong’s patent box regime was gazetted and enacted in July 2024, with retrospective application from the year of assessment 2023/24. Income derived by enterprises from patents, plant variety rights and copyrighted software may be subject to a concessionary profits tax rate of 5%, far below the standard profits tax rate of 16.5%.

It is worth noting that this concessionary regime did not relax Hong Kong’s longstanding tax restrictions on IP costs. First, costs incurred by an enterprise in acquiring IP from an associated party are not deductible for tax purposes (this restriction was introduced by an amendment in 1992). Second, under the general principle that capital expenditure is not deductible, one-off prepaid royalties are generally characterised as capital expenditure and are likewise not deductible for tax purposes.

At the end of January 2026, the Commerce and Economic Development Bureau, together with the IRD and the Intellectual Property Department, launched a two-month industry consultation and received 12 submissions. On 19 May 2026, the enhanced legislative proposals were submitted to the LegCo Panel on Commerce, Industry, Innovation and Technology for discussion.

The principal proposals comprise three items:

  • Allow deductions for the cost of acquiring eight classes of IP from associated parties. These cover patents, know-how, copyrights, performers’ economic rights, protected layout-designs (topographies), protected plant variety rights, registered designs and registered trademarks. Acquisitions from overseas associated parties would be deductible at the actual acquisition cost. Intra-group transfers within multinational enterprise groups would require the submission of an independent third-party valuation report, with the relevant threshold to be prescribed by the IRD in guidelines. For acquisitions from associated parties in Hong Kong, the deduction would be limited to the lower of the buyer’s actual acquisition cost and the sum of the amount previously allowed as a deduction to the seller for acquiring the IP plus the seller’s qualifying research and development (R&D) expenditure; domestic transactions within a local group would be eligible for the domestic transaction exemption under the transfer pricing rules.
  • Allow deductions for prepaid royalties. A one-off prepaid royalty, whether capital or revenue in nature, would be deductible if incurred in the production of assessable profits, and would be apportioned evenly over the licence period (consistent with the accounting amortisation treatment). Upon termination or transfer of the licence, the amount recaptured would be capped at the deduction previously allowed. To protect the tax base, the Commissioner of Inland Revenue could determine the fair market value, require a valuation report and allocate the transaction consideration. A deeming provision would also be introduced to treat the relevant sums received by a Hong Kong licensor as taxable trading receipts.
  • Allow deductions for the acquisition cost of IP used outside Hong Kong. Under the existing rules, expenditure on acquiring IP for use outside Hong Kong is not deductible. The new proposal introduces an exception: where royalty income generated by the IP is taxable in Hong Kong under the foreign-sourced income exemption (FSIE) regime, the corresponding capital expenditure may be deducted proportionately.

The Inland Revenue (Amendment) (Tax Deductions for Intellectual Property Expenditure) Bill 2026 was gazetted on 16 October 2026 and introduced into the LegCo for First Reading on 28 October 2026. If enacted, the new deduction arrangements will apply to qualifying IP rights acquired or purchased under contracts entered into on or after 1 April 2026. 

Outlook: Policy Arrangements from the Second Half of the Year to 2027

In the period ahead, a number of Hong Kong tax concession policies will progressively enter the legislative and implementation stages:

Second half of 2026

The Second Reading debate on the Bill concerning funds, family-owned investment holding vehicles and carried interest is expected to resume. If enacted, the proposed enhancements will apply retrospectively from the year of assessment 2025/26. The Inland Revenue (Amendment) (Tax Deductions for Intellectual Property Expenditure) Bill 2026 was introduced into the LegCo on 28 October 2026 and is proceeding through the legislative process. 

Within 2026

The consultation on the two-tier tax regime for corporate treasury centres closed on 4 September, and the Government will issue an administrative clarification document within the year.

First half of 2027

Legislative amendment proposals for corporate treasury centres will be submitted to the LegCo.

Matters under continued advancement

Research on tax concessions for gold trading and settlement, research on tax policies for art trading, and supporting development of a commodity trading ecosystem under the 15th Five-Year Plan (including expansion of London Metal Exchange warehouse capacity in Hong Kong and warehouse land in the Hung Shui Kiu industrial park).

Viewed comprehensively, this package of policies has three features.

  • First, the various concessionary policies are coordinated and paired with one another: the commodity trading concession is linked with shipping concessions, gold tax concessions are advanced in parallel with the clearing system and vault construction, and the family office tax exemption regime is connected with the New Capital Investment Entrant Scheme.
  • Second, the new concessions are all embedded in the global minimum tax framework, with the optional 15% tax rate, OECD nexus approach and economic substance requirements appearing widely across the various regimes.
  • Third, competition with Singapore continues: Singapore’s Global Trader Programme (GTP) provides concessionary tax rates of 5% to 10%, and its licensing exemption framework for single family offices came into effect on 15 June 2026, while Hong Kong competes to attract institutions to establish a presence through broader asset coverage.

Over the next six months, as the various Bills and consultation exercises progressively enter the legislative and implementation stages, this tax concession system covering multiple sectors will be tested by the market. Under the global minimum tax framework, the actual attractiveness of concessionary policies will ultimately depend on the balance between compliance costs and tax savings.

Hong Kong companies carrying on relevant businesses should continue to monitor the legislative progress and implementation details of these measures. They should also consider seeking professional tax advice at an early stage to assess the potential implications and opportunities and to plan accordingly.

The contents of this article have been compiled from publicly available information released by the Government of the Hong Kong Special Administrative Region, the IRD and authoritative international organisations.

This article was originally published by RSM China CPA LLP (RSM China) on its official WeChat account on 21 September 2026 and has subsequently been updated:*

*This article is sourced from RSM China’s official WeChat account. Its contents are for general reference only and should not be regarded as audit, tax, consulting or other professional advice or services provided by RSM China, nor do they constitute investment advice. The information contained in this report is derived from publicly available sources, but RSM China and the relevant organisations make no representation or warranty as to its accuracy or completeness. Nor shall they be liable for any loss suffered by any entity as a result of using the contents of this report.

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