Hong Kong weighs tax break on fund managers' performance bonuses

Hong Kong is trying to change the math on staying put. The city is weighing a tax waiver on performance-linked bonuses for fund managers, a move aimed squarely at the people global firms compete hardest to keep: portfolio managers, private bankers, senior product specialists and other investment professionals whose pay is tied to results.

The proposal centers on carried interest, the share of profits fund managers earn when investments perform well. Today, that income can be taxed at rates of up to 17%, and officials are signaling that changing that treatment could make Hong Kong the first major Asian financial center to offer tax relief on that kind of compensation. Draft legislation could reach the Legislative Council as early as July, and the relief could be backdated to April 1, 2025, giving firms and employees an immediate reason to revisit how Asia packages senior pay.

For Goldman Sachs and its rivals, the practical issue is mobility. A lower after-tax cost for performance pay can affect where a star investor decides to work, where a team chooses to expand and how aggressively firms need to bid for talent. In Hong Kong, that matters across asset management, private wealth and senior distribution roles, where compensation packages are often negotiated as much on net value as on headline pay. It also puts Singapore, and to a lesser extent Dubai, directly in the frame as Hong Kong tries to close the gap on tax certainty and retain its appeal to mobile capital.

The government has been laying the groundwork for this for years. A Legislative Council paper dated March 2 said the Financial Services and the Treasury Bureau was proposing amendments to the Inland Revenue Ordinance to enhance preferential tax regimes for privately offered funds, family-owned investment holding vehicles and carried interest. Hong Kong’s assets under management reached HK$35.1 trillion at the end of 2024, the paper said, building on a unified funds exemption introduced in April 2019, carried-interest concessions launched in May 2021 and family office incentives added in May 2023.

The policy push comes as Hong Kong is trying to reclaim prestige in wealth management. Its 2025-26 Budget ranked the city among the top three international financial centers and top four IPO markets, while Boston Consulting Group said Hong Kong overtook Switzerland as the world’s largest cross-border wealth hub. Cross-border wealth booked in Hong Kong rose 10.7% in 2025 to $2.9 trillion, according to BCG, in a global market that reached $15.7 trillion.

Industry reaction has been largely supportive. Kher Sheng Lee, Asia Pacific co-head at the Alternative Investment Management Association, said individual-level tax treatment matters for star managers. That is the point Goldman people should read closely: compensation policy is not just a tax issue. In a market where senior talent can move, it is a signal about where the next generation of investing careers will be built.