As an international metropolis, Hong Kong is renowned worldwide for its modernized trust services. Hong Kong Trusts offer comprehensive options for trust control, making it the preferred choice for settlors. As of December 31st, 2021, the total value of assets held by Hong Kong Trusts reached an impressive HKD 4,719 billion, surpassing even the city’s foreign exchange reserves. This raises a crucial question: Why are people from around the world so enthusiastic about establishing trusts in Hong Kong? Below are the five key advantages of setting up a trust in Hong Kong:
In most jurisdictions, settlors don’t have broad default powers over their trust administration and operation. However, Hong Kong grants a wide range of control to settlors.
Hong Kong is a favored tax jurisdiction for private trusts. Hong Kong does not treat trusts like businesses, so any estate held in trust is not taxable unless you generate income from rent from Hong Kong real estate. Income derived by a trust from assets outside Hong Kong is not taxable to the trustee, the beneficiaries, or the trust entity itself. With this rule in mind, assets and profits from the trust will not be subjected to:
Hong Kong has no forced heirship laws. This means the settlor has full freedom to make arrangements for the division of assets. The protection from forced heirship laws makes Hong Kong a more attractive trust domicile, especially for settlors from jurisdictions that have forced heirship laws (e.g. France, Japan). The properties in trusts are also beyond the reach of any other jurisdiction and creditors.
Trusts typically have a duration that depends on the jurisdiction in which the trust is established.
For example, in New Zealand, the maximum perpetual duration for a trust is 80 years, while in Singapore, it is 100 years. In the British Virgin Islands, it is 360 years. In contrast, Hong Kong does not have such limitations, allowing trusts to exist indefinitely. This makes Hong Kong an ideal choice for long-term planning, asset protection, and multi-generational wealth management, as it allows for extended planning periods without the constraint of a fixed time limit.
The Hong Kong trust has a history of over 100 years. Among the 160 trustees in Hong Kong, there have been no reported closings or bankruptcies.
When it comes to establishing and managing trusts, Hong Kong shines as an exceptional destination. The legal environment is supportive, with tax laws often favoring the objectives of trusts. Moreover, there is significant freedom to customize trust arrangements according to your preferences, without any interference from mandatory inheritance rights or laws imposing permanent restrictions. Choosing to establish a trust in Hong Kong is a wise decision that offers you a world of possibilities and unparalleled flexibility.
