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Hong Kong has proposed waiving crypto tax for wealthy individuals in an attempt to strengthen its position as a leading regional crypto hub.
In a 20-page proposal, the Hong Kong government said the tax exemption would apply to private equity funds, hedge funds, and the investment vehicles of wealthy individuals on cryptocurrency gains, private credit investments, and other asset classes.
The tax exemption initiative also extends to private credit, overseas property, and carbon credits. A six-week consultation on the proposal is currently running.
Taxation is “one of the key considerations” for asset managers deciding on where to set up their base, the proposal stated, adding that Hong Kong strives to create a "conducive environment" for them.
By fostering a favourable tax environment, Hong Kong aims to solidify its status as a premier offshore finance hub, particularly for crypto businesses.
“This is an important step in boosting Hong Kong’s status as a financial and crypto trading hub,” said vice chair and international tax partner at Deloitte China, Patrick Yip. This tax exemption would offer "certainty" to family officers and investors, he added.
The move is also believed to intensify Hong Kong's rivalry with Singapore as a leading regional financial hub. Since October, Hong Kong has launched over 450 "open-ended fund companies," low-tax legal structures that can manage large pools of assets.
Singapore introduced its own variable capital company framework in 2020, which has gained traction with more than 1,000 funds launched.
“These changes are designed to put Hong Kong on a par with Singapore or Luxembourg, in that there’s no risk of the fund being subject to tax,” said Darren Bowdern, head of asset management tax for Asia at KPMG, about the proposal.
Just this week, Hong Kong's ZA Bank became Asia's first bank to offer retail crypto trading. ZA Bank customers can trade Bitcoin and Ethereum 24/7 in Hong Kong dollars (HKD) or US dollars without needing to switch platforms.
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Hong Kong Exchanges and Clearing Limited (HKEX) also recently launched the HKEX Virtual Asset Index Series to provide investors with transparent and reliable benchmarks for Bitcoin and Ether pricing in the Asian time zone.
By aggregating prices from top-rated virtual asset exchanges, the Index Series aims to offer a single reference price for these assets, addressing the challenge of price discrepancies across different global exchanges.
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