Advantages of setting up a trust account in Hong Kong

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Advantages of setting up a trust account in Hong Kong

A trust is a safe, some say impenetrable structure, that provides a secure platform to house your investments. It offers the assets placed within protection against all manner of eventualities, especially if you establish your trust in Hong Kong. ‘Asia’s World City’ is a highly regulated jurisdiction and has a favourable taxation regime, making Hong Kong Trusts among the most modern in the world, giving the Settlors (you) wide options to reserve control over the trusts. Read below and get a detailed outline of the advantages of setting up a trust account in Hong Kong.  

Hong Kong is a highly regulated jurisdiction

As a former British colony, Hong Kong’s legal system is based upon English common law, which recognises and regulates trusts. And while people who are unacquainted with the concept of trusts might be worried about transferring ownership of their assets to a trustee, one thing to note is that laws and ordinances govern trusts, and Hong Kong’s trust laws were updated to fit the modern standards in the Trust Law (Amendment) Ordinance 2013

Settlors can have greater control over their trusts

Settlors are the people who establish trust. In most jurisdictions, settlors don’t have broad default powers over their trust administration and operation. Hong Kong, however, grants a wide range of control to settlors. They can appoint agents, nominees and custodians to perform duties on their behalf. Settlors can also manage their trusts and oversee the day to day administration of the investments held in the trust itself. It’s now commonplace for insurance to be put in place offering Settlors additional piece of mind in the unlikely event of a loss occurring. 

Total protection from forced heirship

In some jurisdictions, there are forced heirship rules in place and which de facto determine that a particular portion of the estate must be reserved for a designated category of heirs. This also means that property in a trust may be used to fulfil the forced heirship law if the estate outside of trust is not enough to comply with this law. 

Hong Kong has no forced heirship laws. You have complete freedom to confer your assets, which are held in trust, onto whomever you want after your death. The properties in trusts are also beyond the reach of any other jurisdiction and creditors. 

Better multigenerational planning as Hong Kong trusts can operate in perpetuity

Usually, trusts have specified timeframes, called a ‘perpetuity period.’ Depending on the jurisdiction the trust is created, these can vary. For example, a trust set up in the UK has a perpetuity period of 125 years, and trusts in Singapore, 100 years. Hong Kong doesn’t impose that limit, and trusts set up here can exist indefinitely.  

This makes Hong Kong a desirable jurisdiction for multigenerational estate planning, where more strategic approaches can take place to safeguard and increase your estate for future generation’s enjoyment. 

Hong Kong trusts enjoy a range of multiple tax benefits

Trust beneficiaries in Hong Kong can enjoy multiple benefits, especially when it comes to taxes. For example, 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: 

  • Income Tax on pension distributions
  • Capital Gains Tax
  • Inheritance Tax
  • No Dividends Tax
  • Tax on Interest Deposits

Hence, setting up a trust by someone whose assets are outside of Hong Kong can bring the settlor multiple benefits, especially on the tax ones. 

Hong Kong trusts

As you can see, Hong Kong has one of the most modern and attractive sets of trust laws in the world, making this jurisdiction a competitive location to set up a trust. The process of setting up and managing the trust in Hong Kong is also very easy and transparent, giving you as a settlor a wide range of powers to administer and manage it according to your wishes. With Hong Kong’s economy being one of the freest in the world, but at the same time strictly regulated, making it a good place to set up trust here that will protect your wealth for generations to come. 

Interested to learn more?

If you are interested in learning more about trusts, or trust types in Hong Kong, Soteria Trusts can help. Contact us for a free consultation, where we explain in more detail how trusts operate and will advise you on the best type of trust for your needs. And whether your goal is to save for retirement or ensure your legacy is distributed the way you want it, Soteria Trusts has solutions for you.


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