The New Capital Investment Entrant Scheme (New CIES) started accepting applications on 1 March 2024 after the Hong Kong government announced detailed rules. Eligible persons with HK$30 million (or equivalent) in net assets may apply with the Immigration Department of Hong Kong (Immigration Department) for permission to stay in Hong Kong for 24 months which could be further extended for two 3-year terms after fulfilling the relevant investment requirements. Persons who continuously reside in Hong Kong for 7 years or more may apply with the Immigration Department for permanent resident status.
To fulfil the investment requirement under the New CIES, applicants must make a capital investment of HK$27 million in permissible financial assets (detailed below) and place HK$3 million in the CIES Investment Portfolio. Permissible financial assets include the following:
(a) Equities – shares of companies listed on the Stock Exchange of Hong Kong (SEHK) which are traded either in Hong Kong dollars (HKD) or Renminbi (RMB).
(b) Debt securities – debt securities (i) listed on the SEHK in HKD or RMB or (ii) listed or issued or fully guaranteed by the government of the Hong Kong Special Administrative Region (Government), the Exchange Fund, the Hong Kong Mortgage Corporation, the MTR Corporation Limited, Hong Kong Airport Authority and other corporations, agencies and other corporations wholly or partly owned by the Government.
(c) Certificate of deposits – denominated in HKD or RMB issued by authorised institutions under the Banking Ordinance (Authorised Institutions) with a remaining maturity of not less than 12 months at the time of acquisition by the applicant. Investment in certificate of deposits is subject to a cap of 10% (i.e HK$3 million) of the minimum investment threshold.
(d) Subordinated debt – in HKD or RMB issued by Authorised Institutions.
(e) Eligible collective investment schemes – (i) Securities and Futures commission (SFC) authorised funds which are managed by corporations licensed to perform Type 9 (asset management) regulated activity (Type 9 Licensees) , (ii) SFC-authorised real estate investment trusts managed by Type 9 Licensees, (iii) SFC-authorised investment-linked assurance schemes issued by issuers to carry on Class C business (Authorised Insurers), and (iv) open-ended fund companies (OFCs) registered under the SFC and managed by Type 9 Licensees
(f) Ownership interest in Limited Partnership Funds (LPFs). Investment in LPFs and in private OFCs (referred to in (e)(iv) above) is subject to an aggregate cap of HK$10 million of the minimum investment threshold.
(g) Non-residential real estate – subject to a cap of HK$10 million of the minimum investment threshold.
Save for real estate (referred to in item (g) above), permissible financial assets must be invested through financial intermediaries, the categories of which are: Authorised Institutions, Type 9 Licensees or Authorised Insurers. Only one financial intermediary from each category may be selected by the applicant at the same time.
The permissible financial assets may be managed by the applicant or at the discretion of the financial intermediary. The financial intermediary is responsible for the reporting of the applicant’s portfolio to the government agency Invest Hong Kong (InvestHK) as well as to comply with ongoing reporting obligations. InvestHK will assess the financial merits of the application and monitor the compliance of the applicant’s investment requirement whilst the Immigration Department will assess the application for granting of entry permit, extension of stay and unconditional stay of the applicant.
As mentioned above, the financial intermediary must observe various notification requirements which must be notified to InvestHK / the Immigration Department and the agreement governing the services it provides to applicants should also include such reporting obligations and other specified disclosures under the scheme rules. If applicants are referred to the financial intermediary, it should ensure that proper client due diligence measures are conducted before onboarding the applicant. The financial intermediary should be cautious when dealing with referrers who do not possess the appropriate regulated activity licence with the SFC.
Besides providing discretionary investment management services to applicants, financial intermediaries may also consider expanding the range of financial products available for investment by applicants. As an expansion of the previous CIES scheme, OFCs and LPFs managed by Type 9 Licensees are included as permissible financial assets under the New CIES. With the announcement of the extension of the grant scheme for OFCs by the Government in the recent 2024 Budget, Type 9 Licensees may take advantage of this increase in demand from the New CIES to expand their product range to include OFCs which may be eligible for subsidy under the grant scheme.
For further information, please contact:
Taylor Hui, Partner, Deacons
taylor.hui@deacons.com
