- Reserved Powers to the Settlor: Settlors of a Hong Kong trust are able to reserve the power of investment and asset management of the trust to themselves. This allows the business owner to maintain greater control over the company and trust assets.
- Perpetuity Period of Trust:A Hong Kong trust can last indefinitely. This is particularly useful to settlors who wish to create a high value dynastic trust lasting many generations. The establishment of perpetual trusts is possible only in a few common law jurisdictions.
- Forced Heirship Protection:The forced heirship rules of a foreign jurisdiction will not affect the validity of any settlements of any movable assets into a Hong Kong trust made by settlors during their lifetime. This means that settlors from jurisdictions that prescribe forced heirship rules can now have peace of mind that the trust will benefit their chosen beneficiaries and will disregard any person who would otherwise benefit from their estate under domestic forced heirship rules of their jurisdiction of residence or citizenship. This provision benefits mostly settlers from civil law jurisdictions and asserts that assets in the trust cannot be clawed back by their heirs against their wishes.
- Territorial tax system: All the income derived by the trust from assets outside Hong Kong will not be taxable to the trustee, the trust entity or the beneficiaries. Furthermore, the tax system of Hong Kong allows a resident Hong Kong trust which owns assets outside of Hong Kong to remit income and profits from those assets to the trust in Hong Kong and such income will not be taxable in Hong Kong.
- Absence of capital gains taxes: If a Hong Kong Trust sells property or other assets at a substantial profit, it will not be subject to tax in Hong Kong.
- Absence of withholding tax. Distributions to beneficiaries from a Hong Kong trust out of income earned either in Hong Kong or outside Hong Kong are not taxable in Hong Kong in the hands of the beneficiaries whether the beneficiaries are in Hong Kong or overseas.
If you would like to explore Hong Kong Trusts in more detail – please feel free to email our expert in trusts Furuzonfar Zehni, Regional Director at Jefferson Trust at f.zehni@jeffersontrust.hk.
