[Finance Wiz@Daniel] Comprehensive look at the New Capital Investment Entrant Scheme (CIES)!

2024-06-26

5 Mins Read

Features and application eligibility of the CIES | Minimum investment threshold
Application procedures for the CIES | Investment-linked insurance

Talent and capital mobility are core elements in the development of the global economy. Hong Kong, as a free economy, attracts top talent and capital from around the world with its excellent infrastructure, simplified tax system, and low tax rates. This environment offers investors numerous opportunities for global asset allocation and capital management.

To strengthen Hong Kong's position as a hub for talent and capital and to promote high-quality development, the government relaunched the ‘New Capital Investment Entrant Scheme’ (CIES) in March 2024. This initiative aims to attract more talent and new capital to Hong Kong. Let me walk you through the features of the scheme, application eligibility, procedures, and investment thresholds!

Features of the ‘New Capital Investment Entrant Scheme’ (CIES)

No entrepreneurial or residency requirements with flexible investment options: Investors need only invest in specified asset classes, choose the most suitable investment method within the permitted assets, and maintain the investment for seven years to obtain Hong Kong residency.
Permanent residency for family members: Investors can apply for immigration along with their spouse and minor children.
No capital gains tax: Hong Kong's tax system is simple and well-structured, with relatively low tax rates and no capital gains tax.

Application Eligibility for the ‘New Capital Investment Entrant Scheme’ (CIES)

Age: Applicants must be 18 years or older at the time of applying for the Net Asset Assessment.
Scope of the Scheme: Applicants must fall into one of the following categories covered by the Scheme.
- Foreign nationals (nationals of Afghanistan, Cuba, and Democratic People’s Republic of Korea are excluded);
- Chinese nationals who have obtained permanent resident status in a foreign country;
- Residents of the Macao Special Administrative Region; and
- Chinese residents of Taiwan.
Net assets: Applicants must apply for a Net Asset Assessment, proving they have had Net assets or Net capital with a market value of no less than HKD30 million (or equivalent in foreign currencies) throughout the two years preceding the date he lodged his application for Net Asset Assessment of the Scheme.
No adverse record: Applicants must demonstrate that they have no adverse immigration records and meet general immigration and security requirements; and
Dependants: Applicants may bring dependants to Hong Kong, including their spouse, same-sex/opposite-sex partners, and unmarried dependent children under 18. Applicants can demonstrate that they are capable of supporting and accommodating himself and his dependants, on their own without relying on the any return on the Permissible investment assets, employment self-employment, office, business or public assistance in or carried on in Hong Kong as the case may be. Dependants must meet any relevant entry policies.
Investment management regulations:
- Investors do not need to inject additional funds if the asset market experiences a loss.
- Investment gains cannot be withdrawn.
- Investment switching between permitted investment assets is allowed.

Application procedures for the ‘New Capital Investment Entrant Scheme’ (CIES)

I. Application phase

Net asset assessment: Applicants must first approach New Capital Investment Entrant Scheme Office for verifying whether they have fulfilled the Net Asset Requirements. Upon verification, the office will issue a relevant certifying proof to the applicant and notify the Director of Immigration of the result.
Immigration application—'Approval-in-Principle’: Applicants must submit an ‘immigration application’ to the Director of Immigration. If the application is approved, the applicant will receive an ‘Approval-in-Principle’ and a corresponding visa/entry permit, allowing them to enter Hong Kong on visitor status for not more than 180 days to complete the committed investment.
Investment requirement assessment: After completing the committed investment, applicants must approach New Capital Investment Entrant Scheme Office for verifying whether they have fulfilled the investment requirements. Upon verification, the office will issue a relevant certifying proof to the applicant and notify the Director of Immigration.

II. Stay phase

Immigration application—'Formal Approval’: Applicants must submit the certifying proof to Director of Immigration within its validity period. If they meet the scheme criteria, they will receive a ‘Formal Approval’ for their ‘Entry Application.’ Generally, applicants and their dependants will be allowed to stay in Hong Kong for no more than 24 months, provided they continuously meet the scheme requirements.
Investment management regulation assessment: No earlier than three months before expiry of his limit of stay, investors must apply to the New Capital Investment Entrant Scheme Office for verification of compliance with the Portfolio Maintenance Requirements. Upon verification, the office will issue a relevant certifying proof and notify Director of Immigration of the result.
Extension of stay period: Notwithstanding the relevant certifying proof may have not yet been secured, entrants and their dependants must submit an application for extension of stay to Director of Immigration before expiry of their limited stay. Director of Immigration will make decision on the application for extension of stay, generally extending the stay period for not more than three years.

III. Permanent Stay Phase

Permanent residency: If entrants and their dependants upon a period of continuous ordinary residence in Hong Kong of not less than seven years, they can apply to Director of Immigration for becoming Hong Kong permanent resident in accordance with the law.
Or
Unconditional stay: If entrants have continuously satisfied the Portfolio Maintenance Requirements under the scheme for not less than seven years but unable to fulfill the continuous ordinary residence requirement, they can make their unconditional stay applications within the validity period of the certifying proof to Director of Immigration, allowing them to stay without any restrictions.

Minimum investment threshold and permissible investment assets under the ‘New Capital Investment Entrant Scheme’ (CIES)

Applicants must invest a minimum of HKD30 million (or equivalent in foreign currencies) net value in permitted investment assets (assets purchased before the scheme launch date do not count towards meeting the minimum investment threshold). The asset allocation must comply with the following requirements:

CIES Investment Portfolio (HKD3 million): support the development of innovation and technology industries and other key industries.
Financial assets (minimum of HKD27 million), including the following commonly permitted investment assets:

Equities:
Shares of companies that are listed on the Stock Exchange of Hong Kong and traded in Hong Kong Dollars or Renminbi.
Debt securities:
- Debt securities listed on the Stock Exchange of Hong Kong and traded in Hong Kong Dollars or Renminbi (including debt instruments issued in Hong Kong by the Ministry of Finance of the People's Republic of China and local people’s governments at any level in the Mainland);
- Debt securities denominated in Hong Kong Dollars or Renminbi, including fixed or floating rate instruments and convertible bonds issued or fully guaranteed by: (1) The HKSAR Government, the Exchange Fund, the Hong Kong Mortgage Corporation, the MTR Corporation Limited, Hong Kong Airport Authority, and other corporations, agencies, or bodies wholly or partly owned by the HKSAR Government as may be specifies from time to time by the HKSAR Government, and (2) listed companies on the Stock Exchange of Hong Kong.
Certificates of deposits:
- Certificates of deposits denominated in Hong Kong Dollars or Renminbi issued by authorised institutions as defined in the Banking Ordinance with a remaining term to maturity of not less than 12 months at the time of acquisition.
- The investment amount in certificates of deposits is capped at 10% (i.e., HKD3 million) of the minimum investment threshold.
Subordinated debt:
Subordinated debt denominated in Hong Kong Dollars or Renminbi issued by authorised institutions in compliance with the Banking (Capital) Rules.
Eligible collective investment schemes:
- SFC-authorised Investment-Linked Assurance Schemes issued by insurers permitted to carry on Class C business to the Insurance Ordinance.
- SFC-authorised funds and SFC-authorised real estate investment trusts, both are managed by corporations licensed by or institutions registered with the SFC for Type 9 regulated activity.
- Open-ended fund companies registered under the Securities and Futures Ordinance and managed by corporations licensed by or institutions registered with the SFC for Type 9 regulated activity.
Ownership interests in limited partnership funds registered in Hong Kong under the Limited Partnership Fund Ordinance:
The total investment amount of ownership interests in private limited partnership funds and private open-ended fund companies registered under the Securities and Futures Ordinance and managed by corporations licensed by or institutions registered with the SFC for Type 9 regulated activity is subject to an aggregate cap of HKD10 million.
Non-residential real estate:
Commercial and/or industrial in Hong Kong, subject to a cap of HKD10 million.

Enjoying life insurance protection and achieving investment immigration goals

Applicants can meet the financial asset threshold requirements based on their investment preferences. Among them, qualified investment-linked insurance is one of the most popular choices for asset allocation currently, to achieve their investment immigration goals. While enjoying life insurance protection, investors can also develop their own investment portfolio based on personal needs and strategies. Here are some key features:

Multiple currency choices and global investment opportunities: Investment-linked insurance encompass various financial instruments and sectors in global markets, providing a wide range of investment options. Policyholders can choose to denominate their policies in HKD, USD, EUR, GBP, or RMB, finding suitable investment options to meet different life stages and risk preferences. Under the insurance framework, global asset allocation is possible without restrictions on geography, currency, or investment type.
Building a personal investment portfolio to diversify risk: Investment-linked insurance typically allows policyholders to choose different currency funds or investment tools, diversifying investment risk and providing flexibility. Policyholders can adjust their portfolio without incurring switching fees based on personal needs and market conditions, maximising the protection of their investment portfolio and meeting their needs for wealth management, savings, and investment.
Easily embarking on investment plans: One policy covers multiple SFC-authorised investment options without the need for separate applications for each fund, saving time and providing convenience. Policyholders can switch and change regular premiums according to their wishes, flexibly managing personal funds.
Monthly dividend in cash or units: Some investment-linked insurance products include monthly dividend in cash or units, offering policyholders additional flexibility and control over funds.
Includes life insurance protection to facilitate inheritance: Investment-linked insurance combines investment and life insurance protection, providing death benefits and allowing policyholders to achieve wealth growth through investment, ensuring asset inheritance.

Grasping opportunities and connecting international markets

Through this session of Finance Wiz@Daniel, we have thoroughly studied the New Capital Investment Entrant Scheme (CIES), and I believe everyone now has a clear understanding of the scheme.

Hong Kong, as an international financial center, has always been dedicated to attracting talent and investment opportunities from around the world. This scheme further opens the door for individuals with substantial assets and professional skills from all over the globe to develop in Hong Kong. This opportunity is indeed rare. In the future, let's work together to promote high-quality development in Hong Kong and create more possibilities!

The above content is reviewed by Mr Daniel Lau - Head of Wealth Management Training of AXA Hong Kong and Macau.

For the latest requirements of the ‘New Capital Investment Entrant Scheme,’ please refer to the webpages of the HKSAR Government’s Immigration Department and Invest Hong Kong.

No warranty or responsibility is assumed by AXA Hong Kong and our related or holding companies regarding non-infringement, security, accuracy, completeness, adequacy, reasonableness, fitness for a purpose or free from computer viruses in connection with the information and materials provided. AXA Hong Kong and our related companies and holding companies do not accept any liability for any loss, damage, cost or other expense, whether wholly or partially, directly or indirectly, arising from any error, inaccuracy or omission of the information and materials to the extent that such liability is not excluded by law.

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