Hong Kong *

Hong Kong recognizes and enforces trusts through a statutory framework grounded in English common law principles, supplemented by the Trustee Ordinance (Cap. 29). This legislation, last substantively amended in 2013, governs both onshore and offshore trusts and provides the legal foundation for the establishment, administration, and protection of trusts in the jurisdiction. Hong Kong’s legal environment offers clarity on trustee duties, powers, and rights of beneficiaries, creating a framework that is predictable and conducive to asset holding, estate planning, and wealth management.

A trust established under Hong Kong law may be classified as “offshore” when its settlor, assets, and beneficiaries are located outside of Hong Kong, and the trust is not intended to engage in commercial activity within the jurisdiction. These offshore trusts are commonly discretionary in nature, giving trustees significant flexibility in the distribution of income or capital to beneficiaries, in accordance with the settlor’s wishes as set out in the trust deed or a non-binding letter of wishes.

The legal requirements for the formation of a trust in Hong Kong are minimal: there must be a settlor, a trustee, identifiable beneficiaries (or a charitable purpose), trust property, and a clear intention to create a trust. Although registration is not mandatory, and trust documents remain private, a Hong Kong trust may voluntarily register under the Trustee Ordinance for certain legal advantages. The law allows for the appointment of protectors and enforcers, who may be granted powers to oversee trustee conduct or approve specific actions, thereby enhancing governance and oversight in complex trust structures.

One of the key attributes of Hong Kong’s trust regime is the absence of forced heirship rules. The jurisdiction does not impose succession laws that override the settlor’s intentions, which is particularly relevant for individuals from civil law jurisdictions seeking more flexibility in estate planning. Additionally, under the updated Trustee Ordinance, trustees have a statutory duty of care and may be remunerated for their services, provided this is permitted by the trust deed.

In terms of taxation, Hong Kong does not impose estate duties, capital gains tax, or withholding tax on trust income. The tax liability of a trust depends on whether the trust is considered resident in Hong Kong and whether it derives income sourced from within the territory. Generally, income that arises outside of Hong Kong and is received by a non-resident trustee may not be subject to Hong Kong profits tax, although this depends on the specific structure and activity of the trust.

The role of professional trustees is central to trust administration in Hong Kong. Trustees may be individuals or licensed corporate entities. The Trust or Company Service Providers (TCSP) Licensing Regime, introduced in 2018, requires trust service providers operating as a business in Hong Kong to be licensed by the Companies Registry. This regulatory framework promotes compliance with anti-money laundering and counter-terrorism financing standards, aligning Hong Kong’s trust industry with international best practices.

Private Trust Companies (PTCs) offer an alternative governance structure for families or high-net-worth individuals seeking greater involvement in the administration of their trusts. In Hong Kong, a PTC is typically established as a private limited company whose sole purpose is to act as trustee for one or more family trusts. The structure is particularly suitable in situations where a settlor prefers to retain influence—directly or through trusted advisors—over the decision-making process without being the legal trustee.

A PTC in Hong Kong is not subject to mandatory licensing under the Trust or Company Service Providers (TCSP) Licensing Regime, provided it does not offer trust services to the public and acts solely as trustee for trusts connected with a specific family. Nonetheless, the PTC must comply with basic company law obligations under the Companies Ordinance (Cap. 622) and adhere to corporate governance standards. Its board of directors is often composed of family members, legal advisors, or fiduciary professionals, allowing for a high level of familiarity with the settlor’s objectives and enhanced confidentiality.

While PTCs can facilitate multi-generational wealth planning and improve operational continuity, their effectiveness depends on carefully drafted constitutional documents and the trust deed. It is also important to ensure that the PTC structure does not compromise the legal independence required of trustees. In some instances, a purpose trust is created to hold the shares of the PTC, further separating control and ownership to avoid conflict of interest and reinforce fiduciary duties.

Hong Kong offshore trusts are used in a range of legitimate cross-border applications, including asset protection, wealth transmission, succession planning, and charitable purposes. While not offering statutory asset protection comparable to certain offshore jurisdictions with firewall legislation, common law principles in Hong Kong generally uphold the integrity of trust arrangements against creditors or claimants, provided the trust was not established with intent to defraud.