Hong Kong is expected to soon approve legislation offering tax incentives to fund managers, a move aimed at reinforcing the city’s position as a global wealth management hub. The proposed bill would provide tax exemptions for private equity firms, venture capital funds, and fund managers on performance-related income.

Sandy Fung, a partner at KPMG China specializing in tax and alternative investments, said at a media briefing on Tuesday that the Inland Revenue (Amendment) (Preferential Tax Regimes for Funds, Family-owned Investment Holding Vehicles and Carried Interest) Bill 2026 is likely to be passed shortly by the city’s Legislative Council. She emphasized that the measure is poised to attract fund managers and related professionals to Hong Kong, further strengthening its asset management sector.

Under the bill, which is scheduled to take effect from April 2025, qualifying private equity and venture capital funds would be exempt from paying taxes on carried interest—incentive-based income tied to fund performance. Likewise, fund managers’ performance-related bonuses would not be subject to salary tax if certain eligibility criteria are met.

The draft legislation was officially gazetted in mid-June and reached the second reading stage in the Legislative Council on June 24. If enacted, Hong Kong would become the first major international financial center to implement detailed regulatory clarity on tax breaks specifically targeting carried interest and performance-linked income for funds and their managers.

Currently, individuals in Hong Kong face a salary tax rate capped at 15 percent, while companies incur a corporate profits tax of 16.5 percent. Fung described the proposed law as a “revolutionary improvement,” highlighting its potential to make the city more competitive in attracting global asset management business.

Following the announcement of the bill’s details, KPMG reported a significant increase in inquiries from overseas fund managers considering relocation or return to Hong Kong. Fung also noted that the government plans to implement a “reporting notification” system to gather information about interested funds, including their investment strategies and fund sizes, to better understand market interest and facilitate implementation.

This legislative initiative aligns with Hong Kong’s broader efforts to maintain its status as a leading international financial center amid intensifying regional competition for fund management talent and capital.