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Singapore tightens requirements for family offices applying for tax incentives in the Asian financial centre

22 April 2022

Nicholas Tan

Manager, Private Wealth, Intertrust Singapore

Nicholas Tan

Manager, Private Wealth, Intertrust Singapore

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Singapore has tightened the criteria for family offices based in the Asian financial centre seeking to apply for tax incentives for funds vehicles which they manage or advise directly on. The new rules aim to increase the size of the funds, improve fund managers’ expertise and direct investments into the local economy

Singapore has built a reputation as a popular base for ultra-high net worth families seeking to professionalise the management of their wealth.

According to the Monetary Authority of Singapore (MAS), there are now around 200 Single Family Offices, managing assets in excess of USD20bn.

However, Singapore family offices seeking tax incentives for fund vehicles which they manage or advise directly on will now face tighter requirements such as larger asset size and local investments.

The updated requirements include:

  • revised AUM minimums
  • revised criteria for appropriately qualified investment professionals
  • revised annual (local) business expenditure minimums
  • new mandates to invest in the local market

These updated requirements are applicable for a family office which:

  • is an exempt fund management company which manages assets for or on behalf of a family
  • is wholly owned or controlled by members of the same family.

The changes, which the MAS outlined on 11 April 2022, came into force on 18 April 2022.

How will Singapore family offices be affected?

The MAS says it wants its regulations, policies and incentive regimes to match the ambitions of family offices. It says: “As the family office eco-system in Singapore grows and matures, we seek to increase the professionalism of family office professionals in Singapore and enhance the positive spillovers to the Singapore economy.”

Generally, applications for the tax incentives by Singapore-registered family offices acknowledged or approved by the MAS before 18 April 2022 will be unaffected. All new applications submitted to the MAS from 18 April 2022 onwards will be subject to the updated requirements.

The reforms do not apply to fund vehicles managed or advised by a licensed fund manager in Singapore.

What has changed for Singapore family offices?

The new rules make eligibility for the Section 13O and 13U tax incentive schemes more stringent. Section 13O is restricted to locally incorporated fund entities, while Section 13U applies to Singapore or offshore incorporated fund entities. 

1. Section 13O (previously Section 13R)

Previous conditions included:

  • no minimum AUM
  • no minimum number of investment professionals
  • minimum annual business spend of at least SGD200,000
  • no requirement for local investment

New conditions from 18 April 2022 are the following:

  • SGD10mn AUM at the point of application, rising to SGD20mn within two years
  • employ at least two investment professionals, with a grace period of one year from the point of application to employ the second investment professional
  • minimum annual business spend of SGD200,000 for funds with AUM below SGD50mn
  • minimum annual business spend for funds with AUM above SGD50mn must be at least SGD500,000,
  • minimum annual business spend for funds with AUM above SGD100mn must be at least SGD1mn
  • the fund must invest at least 10% of its AUM or SGD10mn, whichever is lower, in local investments, with a grace period of one year to make the local investments

2. Section 13U (previously Section 13X)

Previous conditions included:

  • minimum fund size of SGD50mn
  • at least three investment professionals
  • minimum annual local business spend of at least SGD200,000
  • no requirement for local investments

New conditions from 18 April 2022 are the following:

  • the minimum AUM requirement of SGD50mn remains unchanged
  • the requirement for at least three investment professionals is unchanged, but at least one of them should be a non-family member, with a grace period of one year from the point of application to employ the non-family member investment professional
  • minimum annual local business spend of SGD500,000 for funds with AUM below SGD100mn
  • minimum annual local business spend of SGD1million for funds with AUM above SGD100mn
  • the fund must invest at least 10% of its AUM or SGD10mn, whichever is lower, in local investments, with a grace period of one year to make the local investments

What else should Singapore family offices be aware of?

The MAS definition of an investment professional includes portfolio managers, research analysts and traders. Each would be expected to earn more than SGD3,500 per month for working “substantially” in the qualifying activity.

Business expenditure includes remuneration, management fees, tax advisory fees and operating costs.

Local investments may include:

  • equities listed on Singapore-licensed exchanges
  • qualifying debt securities
  • funds distributed by Singapore-licensed and/or registered fund managers
  • private equity investments into non-listed Singapore-incorporated companies with business operations in Singapore.

Why Intertrust Group?

  • Intertrust Group can help you set up and run your family office in Singapore. We are market leaders in incorporating and managing entities worldwide.
  • We help with the administration of more than USD470bn of client assets and have over 4,000 employees across the world, combining global and local expertise.
  • We have expertise in all private capital asset classes, focusing on bespoke corporate, fund, capital market and private wealth services, thus enabling our clients to invest, grow and thrive anywhere in the world.
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