How to approach the CIS-to-Hong Kong family-office

Capital does not move by itself. The principals and structures that carry it across borders require a sequenced plan – one that accounts for where tax residence ends, where it begins, and what management-and-control means in both systems. For families relocating from Commonwealth of Independent States jurisdictions to Hong Kong, that sequencing is the entire exercise.

The CIS-to-Hong Kong family-office relocation is governed by no single statute. It sits at the intersection of the Inland Revenue Ordinance (which determines where a Hong Kong-based entity is taxable), the foreign-sourced income exemption regime (in force from 1 January 2023), and the domestic tax and currency-control rules of the relevant CIS jurisdiction. The steps are interdependent: the structure must be ready before the principal moves, and the principal must have moved before the structure can claim Hong Kong residence. Sequence is the gate.

This guide walks through the decision, the steps, the gate at each stage, and the points where CIS-origin relocations routinely go wrong. It is aimed at in-house counsel and principals who are mapping the route before instructing a full advisory team.

What decision are you actually making?

A CIS family relocating to Hong Kong is not making one decision – it is making at least four, in a defined order. Each has legal consequences that the next step will inherit.

The first decision is where the family-office entity sits. Options run from a direct Hong Kong company under the Companies Ordinance (Cap. 622) to an offshore holding entity – typically a BVI or Cayman structure – with a Hong Kong management presence beneath it. In our cross-border practice, the majority of CIS-origin family offices arrive with an existing offshore layer. The question is whether that layer is retained, re-domiciled, or replaced.

The second decision is where the assets sit and which of those assets generate income that Hong Kong will treat as foreign-sourced. The foreign-sourced income exemption regime, introduced with effect from 1 January 2023, imposes economic-substance conditions on passive income categories that would otherwise escape Hong Kong profits tax. A family arriving from the CIS with dividend income, interest, or gains from an offshore entity must assess those categories before the entity is established in Hong Kong.

The third decision is when the principal becomes Hong Kong tax-resident. This is not an election. It is a fact question, driven by physical presence and – for the entity – by the management-and-control test. Arriving too early, without the structure in place, can produce a window during which the principal is resident in Hong Kong but the entity is still resident in the CIS jurisdiction, creating dual exposures.

The fourth decision is how to exit the CIS jurisdiction cleanly. Currency controls, exit taxes, and administrative de-registration requirements vary across CIS states. Some impose an obligation to notify authorities before departing; others attach conditions to the transfer of assets held through domestic entities. The sequencing of these steps with the Hong Kong side is where CIS-specific complexity sits.

How does the Hong Kong tax position work for a relocating family office?

Hong Kong taxes profits on a territorial basis: only profits that arise in or are derived from Hong Kong are assessable under the Inland Revenue Ordinance. That territorial basis is the starting point for a family-office relocation from the CIS, but it is not the end of the analysis.

A family-office entity incorporated in Hong Kong, managed from Hong Kong, and holding offshore assets will generate income that may be characterised as foreign-sourced. Under the foreign-sourced income exemption regime – in force from 1 January 2023 – that income is exempt from profits tax only if the entity satisfies an economic-substance test for the relevant income category or if the income qualifies under a participation exemption or nexus test. The regime aligns Hong Kong's position with the OECD's Pillar Two discussions and with the substance expectations of the BVI and Cayman regimes.

For the Hong Kong entity itself, the two-tier profits tax applies: 8.25% on the first HK$2 million of assessable profits and 16.5% above that threshold. Only one connected entity in a group may claim the lower tier in any given year. Where the family's assets are held through an offshore parent, the interaction of the two-tier rate with the foreign-sourced income exemption conditions will determine how much, if any, of the family-office entity's income is actually assessable.

For CIS-origin families, there is a further layer. The relevant CIS jurisdiction may impose a controlled-foreign-corporation charge, an exit tax on accrued gains, or a currency-control restriction on transferring assets to a foreign entity. None of those rules are displaced by the move to Hong Kong. They must be discharged in the CIS before, or as part of, the relocation sequence – not after. We regularly see principals who have established a Hong Kong structure but have not resolved their CIS-side filing and de-registration obligations, leaving a live exposure in both jurisdictions simultaneously.

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

To discuss how the Hong Kong tax position applies to your family-office relocation from the CIS, contact info@lockhartyip.com.

What is the management-and-control test, and why does it gate everything?

The management-and-control test determines where a company is tax-resident for Hong Kong purposes, and it determines where it was tax-resident in the CIS jurisdiction before the move. Both sides of the test matter, and they must be resolved in sequence.

Under the Inland Revenue Ordinance, a company is resident in Hong Kong if its central management and control is exercised there. This is a substance test, not a registration test. A company incorporated in the Cayman Islands but managed from Hong Kong – with directors meeting in Hong Kong, investment decisions made in Hong Kong, and banking instructions issued from Hong Kong – is likely to be resident in Hong Kong for profits-tax purposes, regardless of where it is registered.

The same logic applies in reverse. A company incorporated in a CIS jurisdiction, managed by a principal who has moved to Hong Kong, may lose its CIS-tax-residence status earlier than the principal expects – or the CIS authority may contest the loss of residence and argue that sufficient management functions remain on the CIS side. Either outcome is possible; the facts of each matter determine it.

What does this mean for sequencing? It means that the principal cannot simply move to Hong Kong and assume the entity follows. The entity's governance must be reconstituted to reflect Hong Kong management before the principal's residence shift is treated as complete. Board composition, the location of board meetings, the signing authority for material transactions, and the location of the entity's records all contribute to the test. In our cross-border practice, we work through these governance elements as a structured checklist before the principal's relocation date is fixed.

A mid-market CIS family office that relocated through our desk in 2026 had a common pattern: the principal arrived in Hong Kong in the first quarter, but the entity's board remained nominally seated in the home CIS jurisdiction, with a local director retained for administrative convenience. The CIS authority took the position that the entity had not lost residence, applying a management-and-control analysis that pointed back to the retained director's functions. The fix required a restructuring of the board and a re-dating of the governance record, with consequential effects on the entity's first Hong Kong tax-return position. The lesson is consistent: governance follows the principal, not the other way around.

What is the step-by-step sequence for a CIS-to-Hong Kong family-office relocation?

The sequence below represents the standard route. The gate at each step is the condition that must be satisfied before the next step can proceed.

Step 1: CIS-side review and exit planning. Before any Hong Kong structure is established, the existing CIS-side position must be mapped. This means identifying: the entities in which the family holds interests, their resident jurisdiction, the controlled-foreign-corporation rules that apply, any exit-tax provisions triggered by a change of residence, and currency-control restrictions on transferring assets offshore. The gate at Step 1 is a clear picture of what the CIS side requires in order to release the assets and de-register the principal's tax residence cleanly.

Step 2: Offshore layer review. Where a BVI or Cayman holding entity is already in place, its substance position is assessed against the economic-substance rules of the relevant offshore jurisdiction and against the Hong Kong foreign-sourced income exemption conditions. If the offshore entity is to continue as the top-holding layer above a Hong Kong management entity, its governance must be independent of the principal's daily management – otherwise the management-and-control analysis will pull it into Hong Kong residence before the family is ready. The gate at Step 2 is a confirmed substance and governance position at the offshore layer. Our guide on re-domiciliation routes for offshore companies addresses the structural options in detail.

Step 3: Hong Kong entity establishment. A Hong Kong company is incorporated under the Companies Ordinance (Cap. 622). The entity's constitutional documents, banking arrangements, and initial board composition are structured to reflect Hong Kong management from inception. The Significant Controllers Register must be maintained from the outset – a requirement in force since 1 March 2018. The gate at Step 3 is a Hong Kong entity with clean governance records, a compliant Significant Controllers Register, and a banking relationship in place before the principal's arrival.

Step 4: Principal's relocation and residence establishment. The principal moves to Hong Kong. Physical presence, the intention to remain, and – where a Hong Kong visa or residence status is involved – the terms of that status all contribute to the residence analysis. The entity's management functions are confirmed as exercised in Hong Kong: board meetings held in Hong Kong, decisions documented there, and any retained CIS-side governance functions formally transferred. The gate at Step 4 is a clean break from CIS-side tax residence, confirmed by a de-registration or equivalent filing with the relevant CIS authority.

Step 5: FSIE and substance assessment. Once the entity is operating in Hong Kong, the income it receives from offshore sources is assessed against the foreign-sourced income exemption regime. For each income category – dividends, interest, gains on disposal of equity interests, and intellectual property income – the entity must satisfy the applicable substance or participation-exemption test. This assessment is not a one-time exercise; it is an annual filing position. The gate at Step 5 is a documented substance file that supports the FSIE position for each relevant category.

Step 6: First profits-tax return. The Inland Revenue Department issues a first profits-tax return approximately 18 months after incorporation. The entity's filing position at that point will reflect the tax-residence analysis, the FSIE claims, and any offshore-entity interactions. The gate at Step 6 is a filing position that is internally consistent with the governance record built at Steps 3 and 4 and the substance file built at Step 5.

If an earlier filing, structure, or enforcement attempt produced an adverse or stalled result, a second read can identify the strategic error and the routes still open. Write to us at info@lockhartyip.com to discuss your position.

Where do CIS-origin relocations most commonly go wrong?

In our experience, CIS-to-Hong Kong family-office relocations go wrong at three consistent points. Understanding them before the sequence begins avoids the most common, and most costly, errors.

Error one: establishing the Hong Kong entity before resolving the CIS exit. A principal who incorporates a Hong Kong entity and begins operating from Hong Kong before completing the CIS de-registration process may find that both jurisdictions assert residence simultaneously. The CIS authority may treat the retained administrative presence – a signatory, a local bank account, a registered office – as evidence that management and control has not shifted. The Hong Kong entity, meanwhile, may already have issued its first management-level decisions from Hong Kong. The overlap produces dual exposure that can take years to resolve. The fix is sequential: CIS exit first, Hong Kong entry second.

Error two: treating the offshore holding entity as a passive container. A BVI or Cayman entity above the Hong Kong management company is not automatically inert. If its directors meet in Hong Kong, sign documents at the instruction of the Hong Kong-based principal, and exercise no independent judgment, the management-and-control test may pull it into Hong Kong tax residence. That outcome is not necessarily catastrophic, but it is often unplanned. The substance and governance of the offshore layer must be designed with the management-and-control analysis in mind, not treated as a separate administrative matter.

Error three: underestimating the CIS currency-control and reporting obligations. Several CIS jurisdictions impose obligations on residents who hold foreign accounts, make foreign investments, or transfer assets offshore. Some of those obligations survive the change of residence for a transitional period. A principal who has formally de-registered from CIS tax residence may still be required to file a final currency-control report or discharge an exit-level filing before the transfer of assets to the Hong Kong structure is permissible. Missing that step does not simply create an administrative fine; in some CIS jurisdictions it can expose the asset transfer to challenge.

What foreign counsel – including advisers familiar with the CIS but not with the Hong Kong side – most commonly miss is the interaction between the FSIE substance conditions and the offshore-entity governance design. It is not enough to satisfy the CIS-exit conditions and establish a Hong Kong company. The income flows from the offshore layer into the Hong Kong entity must, from day one, be structured to meet the foreign-sourced income exemption tests. Retrofitting that position after the first profits-tax return is filed is possible but considerably more complicated.

What does a relocation decision checklist look like?

The following questions are the minimum that in-house counsel should be able to answer before instructing an advisory team. They are not a substitute for advice; they are a diagnostic.

Has the CIS-side tax-residence position been reviewed under the laws of the specific CIS jurisdiction – not the CIS region generally?
Are there exit-tax or deemed-realisation provisions in the CIS jurisdiction that apply when a principal or entity changes tax residence?
Do currency-control rules in the CIS jurisdiction restrict the transfer of assets to a foreign entity before or after the change of residence?
Is there an existing offshore holding entity, and has its economic-substance position been assessed against the relevant offshore-jurisdiction regime?
Has the board composition and governance record of the offshore entity been reviewed for management-and-control risk in Hong Kong?
Is the proposed Hong Kong entity's income profile analysed against the four foreign-sourced income exemption categories?
Has the proposed date of the principal's relocation been sequenced against the entity's governance reconstitution – not simply chosen for personal convenience?
Is there a Hong Kong-admitted adviser in the chain for the matters that require Hong Kong-law advice – entity formation, the Significant Controllers Register, the profits-tax filing position?
If the family holds private interests through a trust, has the interaction between the trust's governing law and the Hong Kong tax-residence analysis been reviewed? See our analysis of comparable considerations in UK-to-Hong Kong relocations for reference.
Is the relocation timed to avoid the family falling within the Pillar Two minimum top-up tax perimeter – applicable for groups with consolidated revenue at or above EUR 750 million for fiscal years beginning on or after 1 January 2025?

None of these questions can be answered generically. The answer for a Kazakh family office differs from the answer for a Russian family office, which differs again from the answer for a family with interests across multiple CIS jurisdictions. The CIS is not a single legal system; it is a shorthand for a group of jurisdictions with different tax treaties, different currency-control regimes, and different administrative procedures for exiting tax residence.

Our capital relocation practice is built around exactly this kind of cross-border sequencing analysis – mapping the exit from the home jurisdiction against the requirements of the destination, and identifying the gates between.

What should a CIS family office expect from the first engagement?

The first engagement with cross-border counsel on a CIS-to-Hong Kong family-office relocation should produce three outputs, in order.

The first is a jurisdiction-specific CIS-exit analysis. This is not a generic review of the CIS region. It addresses the specific jurisdiction from which the principal and entities are departing – the applicable tax-treaty position, the exit-tax or deemed-disposition rules, the currency-control obligations, and the administrative steps required to de-register from tax residence. Where the family has interests across more than one CIS jurisdiction, each is addressed separately.

The second is a Hong Kong entry and structure assessment. This covers the entity type – Hong Kong company, offshore holding entity with Hong Kong management layer, or a combination – the governance design to satisfy the management-and-control test from the correct date, the foreign-sourced income exemption analysis for the anticipated income categories, and the Significant Controllers Register obligations.

The third is a sequencing plan that maps the CIS-exit steps against the Hong Kong-entry steps in chronological order, with the gate at each stage and the adviser responsible for each step. Cross-border counsel on the international and foreign-law side coordinate with locally licensed Hong Kong firms for the matters that require Hong Kong-law advice, and with CIS-jurisdiction advisers for the exit steps.

A European family-office principal with interests in two CIS jurisdictions engaged our desk in early 2027, having already established a BVI holding entity and a Hong Kong company. The principal's relocation date had been fixed without completing the CIS-exit de-registration, and the BVI entity's governance had not been reviewed for management-and-control risk. We re-sequenced the exit steps, restructured the BVI board, and rebuilt the governance record to align the management-and-control analysis across both layers. The first profits-tax return was filed on a defensible position. The result, qualitatively, was a relocation that was completed rather than stalled.

Related practices

Private Wealth – succession planning, trust structuring, and asset protection for families across jurisdictions
Tax Positions – FSIE analysis, Pillar Two assessment, and Hong Kong profits-tax filing positions

Frequently asked questions

Which jurisdiction's law applies to the CIS-to-Hong Kong family-office relocation?

No single jurisdiction's law governs the relocation. The CIS-exit steps are governed by the domestic law of the specific CIS jurisdiction from which the principal departs – including its tax, currency-control, and administrative rules. The Hong Kong-entry steps are governed by the Inland Revenue Ordinance, the Companies Ordinance (Cap. 622), and the foreign-sourced income exemption regime. Where an offshore holding entity is in the structure, the relevant offshore-jurisdiction law applies to its governance. Cross-border counsel co-ordinates across all three layers.

How does the cross-border element affect the CIS-to-Hong Kong family-office relocation?

The cross-border element is the dominant factor in the entire exercise. The timing of the CIS exit determines when Hong Kong residence begins; the design of the offshore-entity governance determines whether that layer is pulled into Hong Kong tax residence; and the income-flow structure determines whether the foreign-sourced income exemption conditions are met. Each step in Hong Kong is contingent on a corresponding step in the CIS jurisdiction. An advisory team that addresses only one side of the border will miss the interaction between the two systems, which is where the principal exposure sits.

Do I need a Hong Kong adviser for the CIS-to-Hong Kong family-office relocation?

Yes. Matters of Hong Kong law – including company incorporation, the Significant Controllers Register, and the profits-tax filing position – require a locally licensed Hong Kong firm. International and foreign-law counsel, such as Lockhart & Yip, advise on the cross-border structuring, the management-and-control analysis, the FSIE framework, and the offshore-entity governance, and co-ordinate with locally licensed firms on the Hong Kong-law steps. The two functions are complementary and both are required for a complete relocation.

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

How to approach the CIS-to-Hong Kong family-office relocation