Wilson Accounting Limited
Limited Partnership Fund (LPF) Set-up Service
Since 31 August 2020, Hong Kong has officially implemented the Limited Partnership Fund Ordinance (Cap. 637), which provides investors with a modern and efficient legal framework to facilitate onshore funds set up in the form of limited partnerships. The introduction of this regime is undoubtedly good news for Chinese investors, especially when exploring investment opportunities in the Guangdong-Hong Kong-Macao Greater Bay Area, where the LPF and the Cross-boundary Wealth Management Connect complement each other to form a complementary policy environment.
Notes on Limited Partnership Fund Set-up Services:
Our team has extensive experience in fund formation and management, focusing on assisting clients in setting up Hong Kong and overseas limited partnership funds (LPFs), open-ended fund companies (OFCs) and other offshore funds. LPFs are flexibly structured and can be used in a variety of investment scenarios, including but not limited to venture capital, private equity, mergers and acquisitions, real estate, credit and virtual assets. Its basic structure includes:
-
General Partner (GP)
Responsible for the management and control of the fund, and assume unlimited legal liability. The GP can be a natural or legal person and can act as an investment manager. -
Limited Partner (LP)
At least one LP is required, and only bears the responsibility for the amount of its capital contribution, and has no day-to-day management rights, but has the right to profit distribution. -
Investment Manager (IM)
Responsible for day-to-day investment management, which can be appointed by the GP or by a qualified third party.
The following is provided by the Xuchen team:
-
Fund Admin.
Responsible for handling day-to-day administrative matters, including fund accounting, report preparation, compliance monitoring and investor relations management. -
Head of Anti-Money Laundering (RO)
Appointed by the GP to implement anti-money laundering measures and ensure compliance. -
Independent auditor
Financial statements are audited annually to ensure transparency and compliance.
Tax Incentives:
Funds set up under LPFOs enjoy unique tax benefits, including profits tax exemption and exemption from share capital registration fees and stamp duty. On 28 April 2021, the Legislative Council passed the Inland Revenue (Amendment) (Tax Concessions for Carried Interest) Bill 2021 (“the Bill”). The Bill seeks to amend the Inland Revenue Ordinance (Cap. 112) to provide a concessionary 0% profits tax rate for eligible private equity funds, and for salaries tax purposes, 100% qualifying carried interest will not be included in employment income for salaries tax purposes. This preferential tax treatment will apply retrospectively to qualifying carried interest acquired or accrued by an eligible recipient on or after 1 April 2020.
Fund Re-domiciliation Policy:
On 1 November 2021, the Hong Kong Government introduced a new fund re-domiciliation mechanism to facilitate the transfer of offshore funds to Hong Kong and registration as LPFs. This policy ensures that the legal status of the Fund is not affected and that its original rights, functions, responsibilities, obligations and assets are preserved. After re-domiciliation, these funds will be deregistered in their original place of registration.
