The backing of foreign investment companies continues to be the key force underpinning the brisk economic recovery in Hong Kong, and regulatory shake-ups in tax, investing and listing policies are needed to reinforce the city’s long-established position as a financial hub, according to PricewaterhouseCoopers ( PwC ).

As well, the city is regaining favour among multinational corporations, PwC notes, as a top-of-mind choice for the location of their regional headquarters.

And, while companies in Hong Kong are subject to a profit tax of 16.5%, the city should halve this tax to increase its appeal, suggests Agnes Wong, PwC’s private clients and family office tax leader for Hong Kong and South China, speaking during a press conference, held by the professional services firm, at which it offered insights regarding the government’s upcoming 2025 policy address and budget.

“Attracting companies to establish regional headquarters here can bring foreign investment opportunities and draw talents to the city,” Wong shares, “and we have seen a 5% yearly increase in such headquarters to more than 1,400 in 2024.”

The need for tax adjustments for family offices has also come under scrutiny amid the government’s stated ambition of developing Hong Kong into a family office hub. Among the adjustments suggested include the listing of collectibles and artworks as tax free assets and the extension of tax concessions under family-owned investment holding vehicles to cover residential properties.

As well, the government’s Capital Investment Entrant Scheme could consider broadening the scope of qualified investments, including residential buildings and cryptocurrencies, as well as adding a wider range of private companies. Such modifications, Wong believes, will ease part of the burden in reaching the scheme’s net asset requirement of HK$30 million ( US$3.84 million ).

Simplify equity investment

And while Hong Kong’s initial public offering ( IPO ) market has seen robust momentum with a seven-fold year-on-year increase during the first half of this year, to lift the mood further and support the market more, Eddie Wong, PwC’s China capital market and accounting advisory service leader, proposes enabling renminbi-dominated purchases of the Hong Kong-listed IPO stocks, which he believes will unleash demand from mainland China.

As well, the innovation of the over-the-counter platform, Eddie Wong notes, can serve the fundraising needs of start-ups and encourage them to list in Hong Kong. In addition to broadening the scope of confidential filings to protect large-cap and high-growth companies, such measures will enhance the competitiveness of the capital market.

In addition, barriers to cross-border investment should be addressed, particularly the unclear listing guidelines for foreign-registered companies. Also, Hong Kong’s stamp duty on stock transactions, which is particularly higher than those in other financial hubs, could be phased out to encourage long-term investment activities.

“With such measures in place to gradually reduce trading costs,” Eddie Wong states, “Hong Kong can strengthen its accessibility and competitiveness, ensuring sustainable growth and solidifying its role as a premier global financial hub.”