Hong Kong’s Limited Partnership Fund: Six Years On, a Credible Alternative to Cayman
As at 30 June 2026 there were 1,729 limited partnership funds registered with the Companies Registry, 406 of them registered in the first half of the year. There were 752 open-ended fund companies on the parallel register. A bill to widen the tax concessions available to funds, family offices and fund managers is currently before the Legislative Council. For a jurisdiction whose private funds have historically been established almost exclusively offshore, principally in the Cayman Islands and to a lesser extent the British Virgin Islands, these figures point to a change in how managers are choosing to domicile their funds.
The Limited Partnership Fund regime is six years old. Before 2020, Hong Kong’s only partnership statute was the Limited Partnerships Ordinance (Cap. 37), enacted in 1912. It was not designed for investment funds and lacked the features managers require: there was no mechanism for re-domiciling an offshore fund, no tailored tax treatment, and no adequate protection for investors against the insolvency of a general partner. As a result, managers who based their operations in Hong Kong continued to establish their fund vehicles offshore.
The Limited Partnership Fund Ordinance
The Limited Partnership Fund Ordinance (Cap. 637) was passed by the Legislative Council in July 2020 and came into operation on 31 August 2020. An LPF must have one general partner, which is liable without limit for what the fund owes, and at least one limited partner, whose liability is limited to its capital commitment. This mirrors the structure of the Cayman exempted limited partnership and the Delaware limited partnership, which remain the standard private equity vehicles internationally. An LPF has no separate legal personality. It is a contractual arrangement between the partners, registered with the Companies Registry. There is no minimum capital requirement and no restriction on investment scope, so the same structure is used for buyout, venture capital, private credit and family office vehicles.
The re-domiciliation mechanism followed a year later. Under the Limited Partnership Fund and Business Registration Legislation (Amendment) Ordinance 2021, in force from 1 November 2021, a limited partnership established in any jurisdiction outside Hong Kong may register as an LPF without being dissolved or re-formed. The mechanism is not limited to any particular jurisdiction: a Cayman exempted limited partnership, a BVI limited partnership or a partnership established elsewhere is eligible on the same terms, provided it meets the requirements that apply to a new LPF. The fund’s contracts, property, rights and obligations are preserved, together with its track record and investor base. The general partner applies on Form LPF10, which must be submitted by a Hong Kong law firm or solicitor. Once the Registrar issues the certificate of registration, the general partner has 60 days to deregister the fund in its home jurisdiction, and can ask the Registrar for more time if needed. For a manager whose investment committee, deal team and operations are already in Hong Kong, this removed the principal practical obstacle to bringing the fund vehicle onshore.
Tax Treatment
The tax position is what has made the regime commercially viable. Qualifying funds, whether onshore or offshore, are exempt from profits tax on a broad range of transactions under the Unified Funds Exemption. In addition, under Schedule 16D of the Inland Revenue Ordinance, eligible carried interest received from a certified fund is subject to profits tax at 0%, and the same carried interest is fully excluded from an individual’s income for salaries tax purposes. The combined effect is that a Hong Kong-domiciled fund can offer managers and investors a tax outcome equivalent to an offshore structure.
The Government is now extending these concessions. On 12 June 2026 it gazetted the Inland Revenue (Amendment) (Preferential Tax Regimes for Funds, Family-owned Investment Holding Vehicles and Carried Interest) Bill 2026, which received its first reading in the Legislative Council on 24 June 2026. The carried interest concession currently applies only to carry derived from private equity-type investments. The Bill extends it to other categories of fund profit. It also widens what counts as a fund for the purposes of the Ordinance, adds to the categories of investment that qualify, and does away with the 5% cap on incidental transactions. Separately, it recognises that carry is often paid to employees through a dedicated carry vehicle rather than directly, and allows the concession to follow the carry through that vehicle. The Bill introduces a tax reporting mechanism and economic substance requirements under the Unified Funds Exemption. Once enacted, the amendments will apply from the year of assessment 2025/26, and the Inland Revenue Department has confirmed that taxpayers who expect to qualify may file their 2025/26 returns on that basis.
On 12 August 2026 the Financial Services and the Treasury Bureau confirmed that the Bills Committee had finished going through the Bill clause by clause, and that the Government intends to bring it back to the Council for its second reading before the end of 2026. The Bureau also stated that it has no plans to expand the scope of the concessions further. Managers structuring around the LPF now should therefore note that the extended concession has not yet been enacted.
Implications for Managers
For a general partner establishing a new Asia-focused fund, a Hong Kong LPF offers proximity to Mainland deal flow and investors, a common law legal system, no public filing of fund accounts, and a tax outcome broadly comparable to the offshore jurisdictions it is competing with. Family offices have an additional consideration: ownership interests in an LPF are permissible investment assets under the Capital Investment Entrant Scheme, so an applicant for residency can satisfy the scheme’s investment requirement through a fund interest they would hold in any case.
The regime carries its own compliance obligations. An LPF must appoint an investment manager, which will in most cases need to be licensed by the Securities and Futures Commission, and an authorised representative responsible for customer due diligence and record-keeping under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. Access to the tax concessions depends on maintaining sufficient substance in Hong Kong, and the 2026 Bill adds formal reporting and substance requirements to the funds exemption. These are manageable for an established manager but represent friction that a purely offshore structure did not carry.
The LPF is not competing against Cayman alone. The BVI remains a common choice for smaller Asian sponsors and for holding vehicles beneath a fund, and its limited partnership legislation was modernised in 2017 with fund use in mind. Singapore competes onshore: the Variable Capital Company is the vehicle most often cited, although as a corporate structure it is closer to Hong Kong’s open-ended fund company than to the LPF, and the more direct comparison is the Singapore limited partnership. Luxembourg, Jersey and Guernsey remain relevant where a fund’s investor base is predominantly European. For most Asia-focused managers, the choice among these is driven by where the fund’s substance and investors are located and by investor familiarity, with tax now a smaller differentiator than it was before 2021.
The 2026 Bill indicates that the Government continues to develop the LPF regime rather than treating it as complete. Each extension of the carried interest concession reduces the remaining case for keeping a Hong Kong-managed fund offshore, whether in Cayman, the BVI or elsewhere. Whether that persuades the next group of managers to register or re-domicile in Hong Kong will become clear over the remainder of 2026.
References
- Companies Registry, Hong Kong, “Companies Registry releases statistics for first half of 2026”, press release, 17 July 2026 (info.gov.hk)
- Companies Registry, Hong Kong, “Limited Partnership Funds – Overview” and “FAQ – Limited Partnership Funds” (cr.gov.hk)
- Limited Partnership Fund Ordinance (Cap. 637, Laws of Hong Kong), in force 31 August 2020
- Limited Partnership Fund and Business Registration Legislation (Amendment) Ordinance 2021 (LPF re-domiciliation mechanism, in force 1 November 2021)
- Inland Revenue (Amendment) (Tax Concessions for Carried Interest) Ordinance 2021, Schedule 16D to the Inland Revenue Ordinance (Cap. 112)
- Inland Revenue (Amendment) (Preferential Tax Regimes for Funds, Family-owned Investment Holding Vehicles and Carried Interest) Bill 2026, gazetted 12 June 2026; Legislative Council Brief ASST/3/1/5C(2026), 10 June 2026
- Financial Services and the Treasury Bureau, reply to media enquiries on the carried interest regime, 12 August 2026 (ird.gov.hk / news.gov.hk)
- Hong Kong Lawyer, “A Timely Recap on Re-domiciliation for Limited Partnership Funds”, November 2024 (hk-lawyer.org)
- HKCGI, “Carried Interest Tax Concessions for Fund Managers” (cgj.hkcgi.org.hk)
