Update: a single-family office structured through Hong Kong

Family offices structured through Hong Kong are operating in a changed environment. Across the corridors our clients use – Mainland China to Hong Kong, Hong Kong to the BVI or Cayman Islands, and onward to the United Kingdom or the UAE – the intersection of succession law, tax residence, and forced-heirship exposure has sharpened. Three developments converge in the current planning cycle: the maturation of Hong Kong's inward re-domiciliation pathway, the Pillar Two minimum tax now operative for in-scope groups, and renewed scrutiny of substance in offshore holding layers. Each carries an action implication for a single-family office using Hong Kong as its hub.

A single-family office structured through Hong Kong benefits from a common-law legal system, the absence of forced-heirship rules under Hong Kong trust law, and a territorial profits-tax regime – but those advantages interact with the laws of the jurisdictions where family members reside, assets sit, and heirs are domiciled. The governing instruments are the Trustee Ordinance (Cap. 29) for trust structures, the Companies Ordinance (Cap. 622) for the holding entity, and the Inland Revenue Ordinance for the tax position of Hong Kong-source income. Where a family's map spans the Mainland and offshore centres, none of these instruments operates in isolation.

This briefing identifies what has changed, who it affects, and the immediate steps a structuring review should address.

What changed – and when it takes effect

Three distinct shifts apply to a single-family office structured through Hong Kong in the current cycle.

First, the minimum top-up tax (Hong Kong's domestic implementation of Pillar Two, the OECD global minimum tax) applies to fiscal years beginning on or after 1 January 2025. In-scope groups are those with consolidated revenue of at least EUR 750 million. For a family office whose structure includes operating subsidiaries within a group of that scale, the Hong Kong entity's effective tax rate and the allocation of top-up liability across the group are now live questions – not planning matters for a future cycle.

Second, an inward company re-domiciliation regime commenced in 2025. An eligible non-Hong Kong company may re-domicile to Hong Kong while preserving its legal identity. For family offices currently holding assets under a BVI or Cayman vehicle that faces substance concerns or a change in family residence patterns, the re-domiciliation pathway introduces a new structural option. Parties should verify the current commencement date and eligibility conditions with counsel before acting.

Third, the Foreign States Immunity Law (PRC) took effect on 1 January 2024, adopting a restrictive immunity doctrine. For family offices with cross-border assets or counterparties connected to Mainland state entities, the enforcement and dispute landscape has shifted in a way that existing holding structures may not have anticipated.

Who is affected across the corridor

The briefing applies most directly to three groups.

First, principals who have restructured residence or relocated to Hong Kong in the past two years. The territorial tax system – 16.5% on Hong Kong-sourced profits above HK$2,000,000, with no capital gains tax and no withholding tax on dividends – is attractive. However, the foreign-sourced income exemption (FSIE) regime, in force since 1 January 2023 as amended, conditions relief on economic substance in Hong Kong. A family office entity that passively channels offshore dividends without meeting the substance test is exposed to reassessment.

Second, families whose succession structure still assumes that a Hong Kong trust is insulated from forced-heirship claims arising in another jurisdiction. The 2013 reform to the Trustee Ordinance strengthened Hong Kong's statutory firewall against foreign forced-heirship claims, and abolished the rule against perpetuities for Hong Kong-law trusts. But the firewall applies to the trust; it does not neutralise the personal law of a foreign heir in every situation. Where family members hold nationality or domicile in a jurisdiction with mandatory heirship rules – as is common across CIS, Middle Eastern, and certain European family structures – the interface requires active management. This is a point where we regularly advise on the gap between the Hong Kong instrument and the law the foreign court may insist upon.

Third, family offices holding a BVI or Cayman intermediate entity above a Hong Kong operating company. Economic-substance regimes in both offshore centres apply. The combination of substance obligations offshore, FSIE conditions in Hong Kong, and – for in-scope groups – Pillar Two modelling, means the tax and structural position of the entire stack now requires a consolidated view rather than jurisdiction-by-jurisdiction review.

For a broader view of how offshore holding layers interact with Hong Kong-based family office structures, see our analysis on Cayman Islands asset protection exposure.

The sequence above describes the standard position. Your matter turns on the documents and jurisdictions actually engaged, and the order of steps across them – which is where structure is won or lost.

To discuss how these developments apply to your single-family office structure, contact info@lockhartyip.com.

The immediate action

Three steps are appropriate now for any family office using Hong Kong as its primary structuring hub.

The first is a succession and forced-heirship audit. Map each family member's domicile, nationality, and habitual residence against the assets they are expected to receive and the law that will govern that transmission. Where a mismatch exists between the Hong Kong trust's firewall protection and the personal law of the heir, the trust documentation and any letter of wishes should be reviewed.

The second is a substance review. The FSIE regime and the offshore economic-substance rules do not operate independently. A family office entity receiving dividends, interest, or disposal gains from offshore sources must demonstrate Hong Kong substance to qualify for exemption. The Inland Revenue Department's published guidance describes the required conditions; compliance with the letter of that guidance is the standard we apply in any review.

The third is a Pillar Two scoping exercise. For families with business interests that approach or exceed the EUR 750 million consolidated revenue threshold – whether personally or through a connected operating group – the minimum top-up tax requires modelling now. The domestic regime effective from 1 January 2025 affects the current fiscal year. Deferring the analysis increases the exposure.

For guidance on the philanthropic layer, which is increasingly part of a Hong Kong family office structure for succession and succession-tax planning purposes across jurisdictions, see our guide on charitable structures in Hong Kong. The full picture of our private wealth practice is set out at lockhartyip.com/practices/private-wealth/.

If an existing structure or succession arrangement has produced an adverse or stalled result under one of these changed regimes, a structured review can identify the point of misalignment and the routes still available.

To map the options for your single-family office through Hong Kong and the relevant offshore centres, reach us at info@lockhartyip.com.

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This publication is general information and does not constitute legal advice. For advice on your situation, contact info@lockhartyip.com.