Limited Partnership Fund

Investment Fund Services Hong Kong Limited Partnership Fund

  • Looking to establish a Limited Partnership Fund (LPF) in Hong Kong? Look no further than Investment Fund Services Hong Kong! Our team of experts can assist you in registering, developing, and building your LPF, with a strong legal and financial network to help you solve any legal issues and submit applications. We can also provide accounting, tax exemption application, audit, and corresponding corporate services for full compliance purposes.

     

  • A Limited Partnership Fund (LPF) is a fund and property pool governed by the Limited Partnership Fund Ordinance. It operates under a limited partnership registered in Hong Kong and is administered by fund managers to carry out day-to-day investment activities and earn reasonable returns for investors. LPFs include private equity funds, venture capital funds, and project funds.

     

  • The General Partner (GP) is responsible for managing and controlling the LPF and is liable for all the debts and obligations of the LPF. The GP can be an individual aged over 21 years old, a Hong Kong or non-Hong Kong limited company, or a registered Hong Kong limited partnership.

To register an LPF, we ensure the following criteria are fulfilled:

  • One General Partner and not less than one Limited Partner

  • An Investment Manager (IM)

  • A Responsible Person to ensure anti-money laundering measures

  • A registered office in Hong Kong

  • Full compliance with the naming requirements under the LPFO

  • An independent auditor will be appointed

  • Partners of the fund may not only be comprised of corporations in the same group of companies with a two-year grace period

  • Not set up for an unlawful purpose

  • External money must be raised within two years from the registration date

  • Limited Partner (LP): With full authorization from the GP, the IM is nominated for the day-to-day investment management of the LPF and must be appointed by the GP (who can be the IM simultaneously).

     

  • Investment Manager (IM): There must be a Responsible Person to exercise control over anti-money laundering (AML) and counter-terrorist financing. AML requirements: The GP would appoint an audit firm practicing in Hong Kong to ensure full compliance.

     

  • Limited Partnership Funds Taxation in Hong Kong

    Hong Kong IRD has extended the scope of funds taxation exemptions by introducing the Inland Revenue (Profits Tax Exemption for Funds) (Amendment) Ordinance 2019.  Under this framework, all funds, including LPFs, can be exempt from Hong Kong profits tax regardless of their structure, central management and control location, size, and purpose.

Profits of an LPF can potentially be tax-exempt in Hong Kong if:

  • They are earned from ‘qualifying transactions’, such as securities, shares, debentures, funds, bonds, or notes of/issued by a private company, future contracts.
  • They are carried out in Hong Kong by, through, or arranged by an authorized financial institution or a licensed corporation.
  • The LPF is a qualified investment fund.

The exemption also covers profits derived from incidental transactions, provided that the fund’s trading receipts from incidental transactions do not exceed 5% of the total of the fund’s trading receipts from both qualifying and incidental transactions.

Furthermore, the profits tax exemption also applies to the special purpose entities (SPEs) wholly or partially held by the tax-exempted LPF, provided that the prescribed conditions can be satisfied.

  • Stamp duty exemption

    Funds registered under the Limited Partnership Fund Ordinance benefit from not being charged with stamp duty when interests in the LPFs are contributed, transferred, or withdrawn. This is because interests in an LPF do not fall within the definition of stock under the Stamp Duty Ordinance.

     

  • Carried interests

    Regarding carried interests earned by qualifying persons/employees in respect of the qualifying investment management services provided to the funds, as of 1 April 2020, they will be taxed at 0% in Hong Kong. However, certain conditions have to be met; for example, the carried interest is required to be a ‘profit-related return,’ and the fund involved is required to be certified by the Hong Kong Monetary Authority.

    For certification purposes, the investment by the fund has to be made in certain assets, such as shares, debentures, funds, bonds, or notes of/issued by a private company. In addition, economic substance (in terms of the number of staff and operating expenditure) is required to be maintained in Hong Kong.

     

  • Management fees taxation

    There is no specific tax exemption granted on management fees received from funds. If the investment manager does not carry on a trade or business in Hong Kong, or the earned management fees do not arise in or derive from Hong Kong, then such management fees can potentially be claimed as offshore sourced and non-taxable in Hong Kong