Hong Kong is considering exempting fund managers from paying tax on their performance bonuses, also known as carried interest, to attract top investment talent to the city [1, 2]. Currently, these bonuses linked to investment returns face a tax rate of up to 17% [1, 2].
The proposed tax relief could be backdated to take effect from April 1, 2025 [1, 2]. This would make Hong Kong the first major financial center in Asia to offer tax breaks on carried interest to individuals [1, 2]. Financial Services and Treasury Bureau spokesperson said the measure "aims to reinforce Hong Kong's competitiveness as the premier asset and wealth management centre in the region" and would draw more funds and family offices to establish operations in the city [1].
Market gains in 2025 led some Asia fund managers to earn more than US$1 million in performance bonuses, with top performers receiving upwards of US$50 million [1, 2]. The move is expected to help Hong Kong compete with other global financial hubs. The proposed tax changes would put Hong Kong ahead of Singapore on tax certainty for carried interest and closer to Dubai's no personal income tax model [1, 2].
Deloitte has been involved in government consultations and held seminars with asset managers in Beijing, Shanghai, and Hong Kong to discuss the proposals. Eric Lam, M&A tax services partner at Deloitte, said, "The industry has a lot of excitement over this. We are proactively talking to our clients on how to best prepare" [1].
Hong Kong's deputy financial secretary, Michael Wong Wai-lun, noted the government is expected to submit draft legislation on the tax exemption to the Legislative Council as soon as June 2025 [1]. The legislation would mark a significant policy shift for the city's asset and wealth management sector.
