Hong Kong is considering removing taxes on fund managers’ performance bonuses to attract top investment talent, according to Reuters and sources familiar with the plan.
The proposed changes would make Hong Kong the first major financial Centre in Asia to offer tax breaks for individuals on performance bonuses, known as “carried interest.” The move could encourage top wealth managers and leading investors to set up operations in the city.
Currently, Hong Kong taxes performance bonuses linked to investment returns at rates of up to 17%. These bonuses are a major part of how hedge funds reward successful portfolio managers, especially during strong market years.
Industry sources said several Asia-based fund managers earned more than $1 million in performance-related bonuses last year, while top performers made over $50 million. A tax exemption could therefore be highly valuable.
Experts say the proposal would give Hong Kong an advantage over Singapore in terms of tax certainty and bring it closer to Dubai, where individuals do not pay income tax.
Deloitte has taken part in government consultations on the proposal and recently held seminars with asset managers in Beijing, Shanghai, and Hong Kong.
Hong Kong’s government is expected to submit draft legislation to the Legislative Council as early as next month, according to Deputy Financial Secretary Michael Wong Wai-lun.
Sources said the tax relief could be backdated to April 1, 2025.
A spokesperson for the Financial Services and Treasury Bureau said the plan is intended to strengthen Hong Kong’s position as a leading asset and wealth management centre in the region. The government also hopes the move will attract more funds and family offices to establish operations in the city.
Hong Kong has recently increased efforts to attract financial professionals and has overtaken Switzerland as the world’s top cross-border wealth hub, according to a new Boston Consulting Group ranking.
Industry experts believe the proposed tax exemption could benefit thousands of investment professionals in Hong Kong, including portfolio managers, traders, and analysts, while also encouraging global investment firms to relocate top talent to the city.
The government said only “genuine carried interest” tied directly to fund performance would qualify for the tax exemption. Fixed salaries and discretionary bonuses would still remain taxable
