Inclusion of “Funds‑of‑One” under the Hong Kong Tax Exemption Regime: A Key Development in Budget 2026

The Hong Kong 2026-27 Budget, delivered on 25 February 2026 (the 2026 Budget), places strong emphasis on further developing Hong Kong as a leading international asset and wealth management center. Among the various initiatives announced, a particularly noteworthy measure is the proposal to enhance the tax regime for asset and wealth management sector by expanding the scope of the definition of “fund” to expressly cover certain single‑investor funds, commonly referred to as “funds‑of‑one”.

The explicit inclusion of funds‑of‑one represents a significant and welcome development, as it provides much‑needed certainty on the availability of Hong Kong’s unified fund tax exemption regime. Historically, single‑investor structures have been susceptible to interpretative uncertainty under the regime, which was traditionally framed around a collective investment concept. While many single‑investor vehicles perform fund‑like investment functions in substance, the absence of multiple investors could give rise to questions as to whether they fell within the statutory definition of a “fund”.

By expressly bringing funds‑of‑one within the scope of the tax exemption framework, the 2026 Budget signals a clear and deliberate policy position. The availability of the exemption should turn on the nature of the investment activity and function, rather than the number of investors alone. This clarification reduces ambiguity and aligns tax treatment more closely with commercial reality, particularly in the context of modern asset management and private wealth structures.

The change is especially relevant for single family offices and ultra‑high‑net‑worth families. In the past, families seeking certainty under the Hong Kong tax regime often needed to structure around this issue through additional layers, co‑investment arrangements, or alternative vehicles to mitigate potential tax risks. The proposed expansion materially broadens the range of viable structuring options.

The Hong Kong Government has indicated that an amendment bill will be introduced in the first half of 2026, with a view to implementing the changes from the year of assessment 2025/26. It is anticipated that the expanded definition of “fund” will be relevant to both the tax concession regime for funds and the tax concession regime for family‑owned investment holding vehicles, subject to the final legislative framework.

Overall, the inclusion of funds‑of‑one supports simpler, more flexible and commercially coherent structures, reduces compliance uncertainties, and enhances Hong Kong’s attractiveness as an international asset and wealth management center.