Independent Wealth

Hong Kong and Singapore are Charting Different Courses for Family Offices

A family office principal was asked to attend a meeting with Singapore's central bank after applying to establish operations there. The meeting involved verifying information about the family office. However, the second half of the meeting turned into a sales pitch, with the central bank highlighting ways to facilitate investment in Singapore.

Competition between Hong Kong and Singapore in attracting family offices is fierce. While Hong Kong is actively welcoming family offices to prevent outflows to Singapore, Singapore is being more selective in the types of family offices it attracts. This may give Hong Kong an advantage in terms of quantity, Fund Selector Asia reported.

Singapore is shifting its focus to the quality of family offices, following a phase of promoting the country as a destination for managing private wealth. On the other hand, Hong Kong is trying to stem the outflow of assets under management (AUM) to Singapore by offering incentives.

The exact number of family offices in Hong Kong and Singapore is difficult to determine, but data suggests a surge in family offices leaving Hong Kong for Singapore. Singapore had around 700 family offices by the end of 2021, up from 50 in 2018. The number could now be as high as 1,500, with family offices relocating due to China's political crackdown and changing policies.

To address the situation, Hong Kong held a closed-door Wealth for Good summit in March, introducing incentives such as a revamped investment migration scheme, art storage facilities, and new tax concessions. The tax concessions exempt single-family offices from profit tax based on specific criteria.

While the new measures were well-received, some Hong Kong-based single-family offices expressed concerns about ownership restrictions. In contrast, Singapore has tightened its criteria for tax exemptions, aiming to attract higher-quality family offices.

Singapore's efforts to attract more high-quality family offices have led to a shift of smaller family offices from Hong Kong to Singapore or bypassing Hong Kong altogether. This should benefit Hong Kong in attracting more family offices.

Overall, Hong Kong's new tax measures indicate recognition of the importance of the family office sector and may put the city on the map.