In his 2023 Policy Address on 25 October 2023, the Chief Executive announced the launch of the New Capital Investment Entrant Scheme (New CIES). The original scheme had been suspended since January 2015.
The New CIES formally launched on 1 March 2024 and is now accepting applications.
The New CIES is intended to be an incentive for high-net-worth individuals to establish their presence in Hong Kong. The Hong Kong government expects it to generate new business and employment opportunities for the financial services industry, and anticipates that the injection of additional funds will provide support to the innovation and technology industries and other strategic industries.
Individuals who apply to enter and/or remain in Hong Kong pursuant to the New CIES are subject to the Rules for the New CIES published by Invest Hong Kong and the Hong Kong Immigration Department, key features of which are summarised below.
Eligibility
Individuals must be absolutely beneficially entitled to net assets or net equity with a market value of at least HK$30 million (or equivalent in foreign currencies) throughout the two years preceding the date of the application for assessing their net assets.
As is evident from the name of this scheme, individuals will also have to make certain investments in Hong Kong, which shall amount to at least HK$30 million (or equivalent in foreign currencies) in permissible investment assets. Any investments made prior to launch of the New CIES on 1 March 2024 will not be eligible.
Permissible investment assets
Investments must fall under two broad categories: -
- HK$3 million (representing 10% of the permissible investment amount) will be subject to lock-up and must be placed into the new CIES Investment Portfolio (CIES IP), which is managed by the Hong Kong Investment Corporation Limited. Investments will be made in companies or projects with a Hong Kong nexus to support the development of innovation and technology industries and other strategic industries beneficial to the long-term development of Hong Kong's economy.
- The remaining HK$27 million (representing 90% of the permissible investment amount) must be invested in permissible financial assets and/or non-residential real estate. Permissible financial assets include equities, debt securities, certificates of deposits, subordinated debt, eligible collective investment schemes and ownership interest in limited partnership funds (LPFs) registered under the Limited Partnership Fund Ordinance (Cap. 637).
The scope of eligible collective investment schemes has broadened with the inclusion of open-ended fund companies (OFCs) and LPFs, and there are no restrictions on how these funds are invested. However, a cap of HK$10 million in ownership interest in private LPFs and private OFCs is imposed.
The option to invest in real estate has been reinstated, although this is restricted to non-residential real estate and capped at HK$10 million. There is also a cap of HK$3 million on investment in certificates of deposits.
Portfolio maintenance
Permissible financial assets may be disposed of or their value may be realised at any time, subject to which an equivalent amount (as assessed on the date of disposal / realisation) will be ring-fenced and should be reinvested in permissible investment assets. Switches between permissible financial assets and non-residential real estate are permitted.
Save for any amount required to redeem the outstanding mortgage loan on the non-residential real estate and its surplus equity (i.e. any amount above the cap of HK$10 million), and any cash dividend income, interest income or rental income arising directly from the permissible investment assets, investors will not be allowed to withdraw or remove any appreciation value from the permissible investment assets.
No top-up will be required if the amount falls below the initial investment amount of HK$30 million.
Becoming Hong Kong permanent residents
Individuals and any of their dependant(s) may apply to become permanent residents of Hong Kong upon reaching seven years of continuous ordinary residence in Hong Kong. Permanent residents of Chinese nationality holding valid permanent identity cards may also apply for a passport of the Hong Kong Special Administrative Region.
If the continuous ordinary residence requirement cannot be fulfilled, they may instead apply for unconditional stay following the end of the seventh year.
Permissible investment assets may then be freely disposed of thereafter.
Key takeaways
Under the New CIES, eligible investors who make investments of HK$30 million (equivalent to approximately £3 million) or above in assets such as stocks, funds and bonds can apply for entry into and residence in Hong Kong. The monetary threshold has tripled from the previous threshold at HK$10 million (equivalent to approximately £1 million) back in 2015.
Owing to the wider scope of permissible investment assets as compared to the previous scheme, it is expected that more investment funds will be set up over the next few months to assist prospective applicants in preparing their portfolio. This also coincides with the three-year extension of the grant scheme for OFCs and real estate investment trusts (REITs) announced in the 2024 Budget, which provides subsidies for qualified OFCs and REITs to set up in Hong Kong. SFC Type 9 licensees may apply to recover eligible expenses incurred in relation to increased demand for incorporation or re-domiciliation of an OFC or the listing of a REIT under the New CIES.
It is envisaged that a new wave of Chinese nationals would apply for residency in Hong Kong under the New CIES. It is also anticipated the New CIES will also attract family offices. Hong Kong has already seen a surge in family offices establishing their roots in the city in recent years, and various arrangements have been put in place to enhance Hong Kong’s attractiveness to them. Profits tax concessions for eligible family-owned investment holding vehicles managed by eligible single family offices and family-owned special purpose entities were recently been introduced in May 2024, and will take retrospective effect commencing on or after 1 April 2022. Enhancements to the preferential tax regime for family offices funds were also announced in the 2024 Budget. Family offices also receive support from the dedicated FamilyOfficeHK team of Invest Hong Kong.
The New CIES is therefore a welcome addition to the various other schemes currently available to investors and their families looking to settle in Hong Kong, with a focus on fresh capital injection rather than academic qualifications and/or industry experience.
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