To maximize tax efficiency and optimize investment outcomes, it is often advantageous for investors to establish a dedicated fund to manage and oversee their assets. This approach can provide significant benefits in terms of operational control, regulatory compliance, and strategic flexibility. Our team of seasoned professionals will conduct a comprehensive analysis of each client’s unique financial and tax circumstances, enabling us to provide tailored advice on the most suitable fund structure. We guide clients through every stage of the process—from initial planning and legal setup to ongoing management—ensuring the structure aligns with both immediate objectives and long-term goals.
What Fund Structures Does CityLinkers Help Establish?
CityLinkers provides end-to-end fund setup services for asset managers, family offices, and institutional investors seeking to establish investment funds in Hong Kong. We support the full spectrum of fund structures including open-ended fund companies (OFC), limited partnership funds (LPF), unit trusts, and offshore fund structures with Hong Kong administration. Our team coordinates legal counsel, auditors, and SFC licensing experts to deliver a seamless fund launch experience.
What Are the Main Fund Structures Available in Hong Kong?
Hong Kong offers several regulated and unregulated fund vehicles tailored to different investor needs:
Open-ended Fund Company (OFC): A corporate fund structure with variable capital, introduced in 2018. OFCs can be structured as public or private funds and offer the flexibility of a company with the features of a fund. The government offers a subsidy scheme with a cap of HK$300,000 per public OFC and HK$150,000 per private OFC (limited to one OFC per investment manager).
Limited Partnership Fund (LPF): Introduced in 2020, the LPF is designed for private equity and venture capital funds. It offers a tax-transparent structure with limited liability for limited partners and flexible governance arrangements. Registration is fast — typically completed within a few days.
Unit Trust: A traditional trust-based fund structure commonly used for retail funds and SFC-authorised funds. The trustee holds legal title to fund assets while investors hold beneficial interests through units.
Offshore Fund with Hong Kong Administration: Many fund managers choose offshore jurisdictions (Cayman Islands, BVI) for the fund vehicle while establishing the management company in Hong Kong to leverage the city's tax treaty network and financial infrastructure.
What Are the Key Steps in Setting Up a Fund?
CityLinkers manages the complete fund establishment process:
- Fund Strategy and Structuring — Defining the investment strategy, target investors, and optimal fund vehicle
- SFC Licensing — Obtaining the necessary Type 1, Type 4, or Type 9 licences for the fund manager
- Legal Documentation — Drafting the offering memorandum, fund constitutive documents, and investment management agreement
- Fund Vehicle Registration — Incorporating the OFC, registering the LPF, or establishing the unit trust
- Service Provider Setup — Engaging custodian, administrator, auditor, and other service providers
- AML/KYC Framework — Implementing anti-money laundering procedures for investor onboarding
- Launch and Ongoing Compliance — Fund launch, investor reporting, regulatory filings, and annual audit
What Tax Benefits Does Hong Kong Offer for Funds?
Hong Kong provides attractive tax concessions for qualifying funds:
Profits Tax Exemption: Under the Unified Fund Exemption regime (Inland Revenue Ordinance Section 20AM), qualifying funds are exempt from Hong Kong profits tax on specified transactions, including private equity investments. The 2021 amendments extended exemptions to include investments in private companies.
Carried Interest Tax Concession: Eligible carried interest issued by SFC-licensed private equity and venture capital funds is taxed at 0% (compared to the standard 16.5% profits tax rate). This concession is available under the Inland Revenue (Amendment) (Tax Concessions for Carried Interest) Ordinance 2021.
No VAT/GST: Hong Kong does not impose value-added tax or goods and services tax, reducing operational costs for fund managers.
Extensive Tax Treaty Network: Hong Kong has over 45 comprehensive double taxation agreements (DTAs), providing tax efficiency for cross-border fund structures.
What Are the Ongoing Compliance Requirements?
Post-establishment, funds must maintain ongoing compliance:
- Annual audit by a Hong Kong CPA firm
- SFC compliance reporting (for licensed fund managers)
- FRR (Financial Resources Rules) monthly submissions
- Investor reporting (NAV calculations, capital account statements)
- AML/CFT compliance monitoring
- FATCA and CRS reporting
- OFC/LPF annual returns and filings
Why Choose CityLinkers for Fund Setup?
CityLinkers offers integrated fund services that cover every aspect of fund establishment and administration. Our experience with SFC licensing, fund audit, tax compliance, and corporate services means we can serve as your single point of contact throughout the fund lifecycle. We have particular expertise in supporting Cayman fund structures with Hong Kong-based management and administration.
We also provide the following services:
How long does it take to set up an OFC in Hong Kong?
An Open-ended Fund Company can typically be incorporated within 4 to 6 weeks after all documentation is prepared. The SFC application process for the fund manager's licence (if not already licensed) takes an additional 3 to 6 months.
What is the LPF registration fee?
The Limited Partnership Fund registration fee is HK$3,034 (comprising a HK$479 application fee and HK$2,555 registration fee), and the annual return filing fee is HK$105. Additional costs include legal fees for drafting the partnership agreement and the required HKMA-authorized institution account setup.
Can a Hong Kong fund invest in overseas private companies?
Yes. Following the 2021 amendments to the Unified Fund Exemption, qualifying funds can invest in overseas private companies and still benefit from profits tax exemption, provided the investment meets the specified conditions.
What is the OFC subsidy scheme?
The Hong Kong government offers a subsidy capped at HK$300,000 per public OFC and HK$150,000 per private OFC, limited to one OFC per investment manager. The subsidy is administered by the SFC.
Does a fund manager need an SFC licence to manage a fund?
Yes. If the fund manager conducts asset management activities in or from Hong Kong, they must hold an SFC Type 9 (Asset Management) licence. Depending on the fund's activities, Type 1 (dealing in securities) and Type 4 (advising on securities) licences may also be required.
What is carried interest and how is it taxed in Hong Kong?
Carried interest is the performance fee paid to fund managers, typically representing 20% of profits above a hurdle rate. Under Hong Kong's 2022 tax concession, eligible carried interest issued by licensed PE/VC funds is taxed at 0%, subject to meeting specified conditions including localization requirements.
