FSTB Clarifies Preferential Tax Regime for Carried Interest
On 12 August 2026, the Financial Services and the Treasury Bureau (FSTB) responded to media enquiries regarding the Inland Revenue (Amendment) Bill 2026, which introduces enhancements to preferential tax regimes for privately offered funds, family-owned investment holding vehicles, and carried interest.
The Bill, tabled in June, seeks to attract more funds and family offices to Hong Kong, strengthen local investment management, and draw in global capital. A key measure is the expansion of the preferential tax regime for carried interest beyond private equity investments, allowing other eligible fund profits to qualify for profits tax and salaries tax concessions. The regime applies only to “funds” as defined under the Inland Revenue Ordinance, excluding proprietary trading businesses.
Eligible carried interest refers to returns linked to fund performance, earned by fund managers or qualifying employees through investment management services in Hong Kong. These services include fundraising, investment research, acquisition and management of assets, and assisting invested entities in raising capital. The Bill also refines distribution arrangements, broadening the scope of “associate” and permitting qualifying employees to receive carried interest through other entities.
The Bill is under scrutiny by the Legislative Council’s Bills Committee, with clause-by-clause examination completed. The Government aims to resume the second reading debate in the latter half of 2026, with measures effective from the 2025/26 assessment year upon passage. The Inland Revenue Department will issue administrative guidance to clarify implementation details.
The FSTB has maintained close dialogue with industry stakeholders, many of whom, both local and overseas, have expressed interest in expanding operations in Hong Kong in light of the proposed tax incentives. The Government expects these measures to attract more global capital, stimulate related professional services, and reinforce Hong Kong’s position as a leading international asset and wealth management hub.
