Hong Kong ramps up tax scrutiny on PE, VC funds

Hong Kong tax authorities have intensified scrutiny of private equity and venture capital funds amid efforts to plug widening deficits, with the Inland Revenue Department (IRD) stepping up reviews on carried interest and management fees over the past two years. Tax advisers report a 50% rise in inquiries from fund clients seeking guidance. While the IRD denies targeting fund managers specifically, it acknowledged audits on “high-risk cases.” The city, grappling with economic headwinds and a budget shortfall, raised taxes on top earners in 2024 and is eyeing new revenue sources. Back taxes and penalties assessed hit HKD3.3bn in FY 2023/24, up 27% year-on-year. Carried interest is taxed as performance fees at 15–16.5%, while management fees face the standard 16.5% corporate rate.