Tax Planning
Maximizing Hong Kong’s Carried Interest Concession: Key Criteria Every Fund Manager Should Know
Hong Kong’s new preferential tax regime for carried interest offers powerful incentives — but to benefit, fund managers must carefully satisfy eligibility and compliance criteria under the Inland Revenue (Amendment) Bill 2026.
By NomadicTax Research Team • 5-8 min read • September 7, 2026
## What Is the Carried Interest Regime?
Under the **Inland Revenue (Amendment) (Preferential Tax Regimes for Funds, Family-owned Investment Holding Vehicles and Carried Interest) Bill 2026**, Hong Kong is enhancing its carried interest concession. Key enhancements: expanding beyond private equity funds to include carried interest from other "eligible funds" with profits linked to investment performance. The concession aims to attract global capital and fund management activities to Hong Kong. ([ird.gov.hk](https://www.ird.gov.hk/eng/ppr/archives/26081201.htm?utm_source=openai))
## Who Qualifies?
To benefit, you must meet multiple requirements:
- Be a **fund management company or its qualifying employees** providing investment management services in Hong Kong. ([ird.gov.hk](https://www.ird.gov.hk/eng/ppr/archives/26081201.htm?utm_source=openai))
- Eligible carried interest must be accrued or received **on or after 1 April 2025/26** (year of assessment 2025/26 onward) under the Bill. ([ird.gov.hk](https://www.ird.gov.hk/eng/ppr/archives/26081201.htm?utm_source=openai))
- The fund (or entity) must satisfy definitions such as “certified investment fund,” or “specified entity”—such definitions are expanding under the new Bill. ([ird.gov.hk](https://www.ird.gov.hk/eng/ppr/archives/26081201.htm?utm_source=openai))
- Substantial activity requirements: number of full-time qualified employees in Hong Kong, operating expenditure incurred locally, etc. ([ird.gov.hk](https://www.ird.gov.hk/eng/faq/cpt51.htm?utm_source=openai))
## What Tax Concessions Are Available?
If eligible:
- **Profits tax concession**: eligible carried interest earned by the fund management company may enjoy a preferential profits tax rate (could be 0% under certain conditions) on carried interest. ([ird.gov.hk](https://www.ird.gov.hk/eng/faq/cpt51.htm?utm_source=openai))
- **Salaries tax concession**: qualifying employees may be excluded from salaries tax in respect of carried interest, subject to the above criteria. ([ird.gov.hk](https://www.ird.gov.hk/eng/faq/cpt51.htm?utm_source=openai))
## Application & Certification Process
- A fund must apply for **certification from the Hong Kong Monetary Authority** (MA) under Schedule 16D to benefit. If not yet certified, certain transitional rules allow temporary compliance under proposed changes in the Bill. ([ird.gov.hk](https://www.ird.gov.hk/eng/faq/s15.htm?utm_source=openai))
- Employees or qualifying persons must complete **Supplementary Form S15** together with their profits tax returns (Forms BIR51/BIR52) to claim the profits tax concession. ([ird.gov.hk](https://www.ird.gov.hk/eng/faq/s15.htm?utm_source=openai))
## Example Case Study: Private Equity Firm
| Scenario | Without the Bill | With the Bill (post-enactment) |
|---|---|---|
| Fund manager in Hong Kong managing PE fund, receiving carried interest tied to profits over hurdle rate | Profits taxed at normal profits tax; employees taxed under salaries tax in Hong Kong | If qualifying fund and fund manager act in Hong Kong, manager may get profits tax concession; qualifying employees can exclude the carried interest from salaries tax—with proper forms and MA certification |
## Action Steps & Tips
1. **Review existing fund structures**: Are you operating through entities that would meet "fund" definition or associated corporate partnership criteria?
2. **Ensure local presence**: Hire full-time staff in Hong Kong; incur local operating expenditures to meet the substantial activity criteria.
3. **Apply for MA certification early** to avoid delays in obtaining tax concessions. Plan transition for 2025/26 assessments.
4. **Track your obligations**: Use Form BIR51/BIR52 and S15 properly; ensure employer reports carried interest accrued in IR56B as required. ([ird.gov.hk](https://www.ird.gov.hk/eng/faq/cpt51.htm?utm_source=openai))
## What’s Next?
The Bill is still under scrutiny in the Legislative Council and targets taking effect **from the year of assessment 2025/26**, pending final passage. Administrative guidance will follow to clarify implementing rules. ([ird.gov.hk](https://www.ird.gov.hk/eng/ppr/archives/26081201.htm?utm_source=openai))