Hong Kong
Legal
Country code – HK
Legal basis – Common law
Legal framework – Trust law (Amendment) Bill 2013
Formal name – Trust
Settlor – The settlor is the person who establishes and whose assets are put into the trust. It may be either an individual or a legal entity.
The settlor may reserve significant listed powers for himself without affecting the validity of the trust and may also be a beneficiary. There may not be protection from a subsequent bankruptcy after assets are gifted to the trust.
Trustee – Trustees are the legal owner of the assets who have a fiduciary and statutory obligation to act in the best interest of the beneficiaries.
Trustees may be corporate bodies or individuals. Professional or resident trustees are not required by law.
Custodian trustees may be permitted.
Beneficiaries – Beneficiaries are those who get benefit from the trust. Beneficiaries may be natural persons or body corporates.
The terms of a trust may provide for the addition or removal of a person as a beneficiary or the exclusion of a beneficiary from benefit either revocably or irrevocably, may impose an obligation on a beneficiary as a condition of benefit.
There are no specific provisions in the law to prevent beneficiaries from draining the trust of its assets and spending in a thrifty way. There are specific legislative provisions to avoid probate and forced heirship.
Protector – The appointment of a Protector is optional.
Disclosure – As there are no registration requirements for the Hong Kong Foreign Trust the details of the Settlor and Beneficiaries are not disclosed to any person other than the Trustee.
Protection from foreign judgments – The Trusts law does not include provisions to ignore and not enforce foreign judgments. Hong Kong has ratified The Hague Convention on Trusts.
Protection from creditors – The Trusts law does not repeal the Statute of Elizabeth, so transfers by the settlor to the trust may be set aside if the settlor transferred the property before the debt arose. The creditor must prove the fraudulent transfer of assets to the trust, which are not clearly defined by the law. Creditors’ claims may be brought jointly. If a fraudulent transfer is proven, trust may be declared invalid.
Protection for immigrant trusts – Trusts that migrate from other jurisdictions do not benefit from retroactive protection.
Community property – Community properties transferred to a Hong Kong trust may not retain its community property character.
Exclusion of foreign law - There are no provisions in the legislation to be able to exclude foreign law.
Choice of law – The choice of law of Hong Kong to govern the trust or a particular aspect of that trust, may not be binding.
Duration – Hong Kong trust instruments can last indefinitely.
Compliance – There are no annual reporting requirements, provided that assets are not located in Hong Kong, and beneficiaries are not Hong Kong residents.
- Settlor as a beneficiary
- Bankruptcy protection
- Ignore foreign judgements
- Hague convention on trusts
- Choice of law is binding
- Protection from immigrant trusts
- Community property provisions
- Custodian trustee permitted
- Rule against perpetuities (years)
- No Specific exclusion of foreign law
- Yes Settlor can retain control
Protection of Settlor
Protection from foreign judgements
- Avoidance of forced heirship
- Spendthrift provisions
- Exclusion of Statute of Elizabeth laws
- Trust invalid if transfer fraudulent
- Creditor must prove fraudulent transfer
- Clear definition of fraudulent transfers
- Separation of creditor claims
- Statutory limitation on fraudulent transfer
Protection of Beneficiary
Transfers
Taxes
A trust established in Hong Kong may not be subject to local taxes applicable to the assets and income of the trust, provided that no residents of Hong Kong benefit from the trust and no physical assets are located there.
It must be noted that the choice of law of the trust would not be applicable to tax matters, which would be governed by the respective jurisdiction where the settlor, beneficiaries, assets or trustee are located, as applicable.
You should consult with your tax advisor or accountant to know the tax implications in your jurisdiction of residence when establishing a trust in Hong Kong, transfer assets to it and receive profits from said assets.
- Offshore Income Tax Exemption
- Offshore capital gains tax exemption
- Offshore dividends tax exemption
- CFC Rules
- Thin Capitalisation Rules
- Patent Box
- Tax Incentives & Credits
- Property Tax
- Wealth tax
- Estate inheritance tax
- Transfer tax
- Capital duties
- 0% Offshore Income Tax Rate
- 16.5% Corporate Tax Rate
- 0% Capital Gains Tax Rate
- 0% Dividends Received
- 0% Dividends Withholding Tax Rate
- 0% Interests Withholding Tax Rate
- 4.95% Royalties Withholding Tax Rate
- 0 Losses carryback (years)
- Indefinitely Losses carryforward (years)
- FIFO Inventory methods permitted
- 72 Tax time (hours)
- 3 Tax payments per year
- 5.00% Social Security Employee
- 5.00% Social Security Employer
- 17% Personal Income Tax Rate
- 0% VAT Rate
- 35 Tax Treaties
Country details
Hong Kong is a Special Administrative Region of the People’s Republic of China (Hong Kong SAR). Its official languages are English and Cantonese.
Although it is part of the People’s Republic of China, the region maintains an independent economic, administrative and judicial system, and even its own currency, the system of customs and external borders. Its official legal tender currency is the Hong Kong Dollar (HKD), pegged to the USD, which is the ninth most traded currency worldwide.
The legislative council is the Hong Kong Parliament, which is formed by 60-members, half elected by universal suffrage in geographical circumscriptions, while the other 30 are elected by groups of representatives from different economic and social sectors.
Its public finances are characterized by its sustainability, with no public net debt, continuous government surplus and ample foreign exchange reserves, all supported by rigorous anti-corruption measures.
Hong Kong’s economy is mainly based on financial services, tourism, wholesale and retail trade, and international trade, especially trade between China and the rest of the world. Hong Kong is one of the world’s major financial hub, ranking eleventh worldwide in the volume of banking operations and the Hong Kong Stock Exchange being the second largest capital market in Asia, after the Tokyo Stock Exchange.
Tax treaties
Tax treaties Map
Services
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