Hong Kong plans to change rules on carried interest that could allow asset managers to earn performance fees free of tax, the Financial Times reported on Thursday, citing people familiar with the matter.
Under a bill that the Legislative Council will consider “imminently”, profit from a range of investments would be eligible for tax treatment as carried interest, rather than just profit from private equity transactions, the newspaper reported.
Carried interest refers to the part of private fund managers’ compensation tied to profits generated, which allows fund managers to pay lower taxes compared to ordinary income.
Hong Kong’s Financial Services and Treasury Bureau (FSTB) did not immediately respond to a Reuters request for comment. Reuters could not verify the report.
A spokesperson from Hong Kong’s FSTB told FT that the government planned to introduce the amendment by the middle of 2026, stressing that bonuses and payments tied to general service “would remain taxable at the normal profits tax rate”.
The reforms were to “reinforce Hong Kong’s competitiveness as the premier asset and wealth management centre in the region,” the spokesperson said.
The proposed rule change comes as China is restricting some of its companies incorporated overseas, or so-called red-chip firms, from seeking initial public offerings in Hong Kong, which was the top global IPO market last year.
Reuters
