Hong Kong cuts taxes for hedge funds, sparking financial sector maneuvering

Hong Kong just made it a lot cheaper to be a hedge fund manager. The city’s Inland Revenue Amendment Bill, gazetted on June 12, would extend an effective 0% tax rate on carried interest and performance fees to a sweeping range of fund types, including hedge funds, private credit, venture capital, family offices, and digital-asset funds. The result: a hiring spree that has already pushed hedge fund headcounts up 22% as the industry repositions around the new incentives. The bill moved to a second reading in Hong Kong’s Legislative Council on June 24 and is expected to pass later this year. If it does, qualifying structures could benefit retroactively from April 2025, giving fund managers a strong incentive to restructure now rather than wait. What the bill actually changes Previously, Hong Kong’s carried interest tax concession was largely the domain of traditional private equity. Performance fees in the hedge fund world were taxed at rates up to 17%, the standard salaries tax ceiling. Under the new framework, those same fees would be taxed at an effective rate of zero when structured as carried interest tied to fund performance. The bill also strips away two bureaucratic barriers t...