March 2026

Hong Kong has announced a series of proposed legislative enhancements to its preferential tax regimes for investment funds, family-owned investment holding vehicles (FIHVs), and carried interest. The initiative is part of the government’s broader strategy to strengthen its position as a leading international asset and wealth management hub.

Currently, Hong Kong offers several tax regimes aimed at supporting the asset management industry, including profits tax exemptions for privately offered funds and offshore funds, as well as concessions for carried interest and family investment structures. The proposed changes aim to expand the scope and effectiveness of these regimes.

Key proposed changes to the unified fund tax regime

Among the most significant updates, the proposals would broaden the definition of qualifying funds to include additional categories such as pension funds, endowment funds, and certain single-investor structures.

The scope of eligible investments would also be expanded to cover a wider range of asset classes, including overseas real estate, carbon credits, insurance-linked securities, digital assets, and commodities.

In addition, profits derived from qualifying investments held through special purpose entities (SPEs) would benefit from full tax exemption, with the removal of existing limitations on incidental transactions. The role and permitted activities of SPEs would also be clarified and expanded.

To align with international standards, new economic substance requirements are expected to be introduced, including minimum local employment and operating expenditure thresholds.

Changes affecting family investment holding vehicles (FIHVs)

Similar enhancements are proposed for the FIHV regime. These include adjustments to the definition of qualifying transactions and investments, as well as updates to the treatment of family-owned special purpose entities.

The proposals also refine anti-avoidance provisions, particularly those related to round-tripping and financial activities, to ensure the regime remains robust while still attractive to investors.

Updates to the carried interest tax concession

The carried interest regime is also proposed to be revised. Proposed changes include removing certain administrative requirements, expanding the definition of eligible recipients and transactions, and clarifying the conditions under which carried interest qualifies for the concession.

Outlook

The proposals build on the measures announced in the 2025/26 Budget and the subsequent updates included in the 2026/27 Budget, which confirm Hong Kong’s commitment to strengthening its competitiveness in the global asset and wealth management sector. If approved, the changes are expected to apply from the 2025/26 year of assessment.

The United Arab Emirates Ministry of Finance has published the official guidelines for the implementation of mandatory e-invoicing, marking an important step in the digitalisation of the country’s tax system. The new regulatory framework defines the scope, technical model, and implementation timeline.

Scope of application E-invoicing will have a broad scope and will be mandatory for all businesses operating in the United Arab Emirates, regardless of VAT registration, with limited specific exclusions. The obligation applies to business-to-business (B2B) and business-to-government (B2G) transactions, while business-to-consumer (B2C) transactions remain out of scope.

Businesses will be required to issue and receive electronic invoices through an Accredited Service Provider (ASP), which must be appointed in advance in accordance with the deadlines set by the Ministry of Finance (MoF).

Implementation timeline

The rollout will take place gradually:

• Pilot and voluntary phase: from 1 July 2026.
• Mandatory phase for the private sector:
  • Businesses with annual turnover equal to or exceeding AED 50 million: ASP appointment by 31 July 2026 and implementation by 1 January 2027.
  • Businesses with annual turnover below AED 50 million: ASP appointment by 31 March 2027 and implementation by 1 July 2027.
• Government entities: ASP appointment by 31 March 2027 and mandatory compliance from 1 October 2027.

A 24-month grace period is also provided for transactions between members of the same VAT group starting from 1 January 2027. During this period, intra-group transactions will not be subject to e-invoicing requirements. The Ministry of Finance has introduced administrative penalties for non-compliance with these deadlines.

Technical model The system will be based on a five-corner Peppol model. Invoices must be issued in XML format in accordance with Peppol PINT A-E specifications and transmitted via accredited providers, with data reported to the Federal Tax Authority (FTA).

Additional requirements A list of mandatory fields for compliant e-invoices has been published. These include invoice-level information (invoice type code, transaction type indicators, specification identifier), seller identifiers (legal name, electronic address based on TIN, registration ID, TRN where applicable), buyer information, invoice totals, tax category breakdown, and detailed line-level attributes. It is also confirmed that VAT amounts and total payable amounts must always be expressed in AED. Where a foreign currency is used, conversion into AED must follow the exchange rate set by the Central Bank of the United Arab Emirates. Documents must generally be retained for five years and must remain accessible to the FTA at all times, even if stored abroad.

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) are planning to issue proposed regulations concerning the calculation of taxable income or loss and foreign exchange gains or losses for Qualified Business Units (QBUs) under Section 987 of the Internal Revenue Code (IRC).

A Qualified Business Unit is a clearly identifiable and separate unit of a trade or business that maintains its own books and records and may operate with a functional currency different from that of its owner. In these situations, Section 987 establishes the rules for determining income, losses and foreign exchange effects related to activities carried out in a foreign currency.

The proposed regulations aim to simplify the application of Section 987, reduce compliance burdens for taxpayers, and clarify certain technical aspects that may affect ordinary business transactions.

Among the key elements of the proposal is the possibility for taxpayers to adopt an alternative method for calculating income or loss, similar to an approach proposed in the past. This method, known as the “equity pool method,” allows the income, gains, losses, and deductions of the QBU to be determined in the QBU’s functional currency and then translated into the owner’s functional currency using the annual average exchange rate.

The proposal also includes several technical adjustments, such as narrowing the scope of the loss suspension rules, simplifying the recognition of suspended losses, and expanding the definition of hedging transactions for purposes of Section 987.

In addition, Controlled Foreign Corporations (CFCs) may be allowed to elect not to compute or recognize foreign exchange gains or losses, except in connection with certain internal transactions.

Taxpayers may rely on certain provisions of the proposal before the final regulations are issued, provided the rules are applied consistently. The IRS has also opened a public consultation process, with comments accepted until April 26, 2026.

These proposed changes may have important implications for multinational companies operating through business units in different currencies.