With Asia’s billionaire population increasing by 16.5 percent last year, the continent is now home to over a quarter of the world’s ultra-rich. If this trend continues, that number is projected to account for a third of the world’s billionaires by 2023.
This explosive growth has spurred a wealth of investment opportunities for Asian families. In order to preserve their wealth, these families have created a bloom of Single-Family Offices in the region to manage their wealth.
This already large yet rapidly expanding industry has been a key focus for the Singapore Government over the last decade, rightly seeing it as a major business opportunity and doing whatever it can to attract the region’s wealthy to set up family offices here. To maintain its attractiveness, Singapore boasts some of the most tax-friendly incentives in the world.
Fund Tax Incentives
To assist family offices in managing their wealth funds, the Singapore Government provides several tax incentives, which can exempt a broad range of investment gains. Unlike other jurisdictions, the Government also concessionary exempts single family offices from licensing requirements
The combination of exemption from a Capital Markets Services License and tax incentive allows a Singapore-based family office to be tax efficient with minimal regulatory obligation.
New 2023 Criteria (Updated 5th July 2023)
In order to ensure that the Family Offices started in Singapore are of the highest standards, the government maintains a comprehensive set of criteria to ensure that the above tax incentives are only granted to funds that demonstrate they are sound, credible, and robust.
Recently, Singapore’s Monetary Authority of Singapore (MAS) imposed new and stricter conditions for single family offices looking to tap on the 13O and 13U tax incentive schemes to refresh the criteria and address the current economic outlook. The new conditions are outlined in the following table:
|New (w.e.f. 5 July 2023)|
|Assets Under Management (AUM)||Minimum fund size of S$20 million at the point of application and throughout the incentive period||Minimum of S$50 million in designated investments as defined in the Income Tax Regulations 2010|
|Fund Manager||Must be licenced by MAS or exempt as a
|Must be licenced by MAS or exempt as a
|Number of Investment Professionals (IP)||Employs at least two IPs. At least one IP must be an individual who is not a family member of the beneficial owner, or an employee of the family office during the point of application and during the incentive period||Employs at least three IPs, with at least one IP being a non-family member of the beneficial owner, or an employee of the family office at the point of application and throughout the incentive period|
|Minimum Capital Deployment Requirement (CDR)||Fund must invest the lower of:
Option 1: Equities/REITs/Business Trusts/ETFs listed on MAS-approved exchanges
Option 2: Eligible debt securities
Option 3: Non-listed funds distributed by licensed financial institutions in Singapore
Option 4: Climate-related investments
Option 5: Non-listed funds
Option 6: Mixed finance structures with significant involvement of financial institutions in Singapore
The fund must achieve the CDR by the year-end of the 1st full-year Annual Declaration and for each continuous financial year
There is a multiplier of 1.5x or 2x the amount invested for qualifying investments recognised for the computation of CDR as explained in the table below
|Private Banking (PB) Account||Fund entity must have a PB account with a MAS-licensed financial institution during application and the incentive period|
|Tiered Business Spending Framework|
|Required Local Business Spending in each YA||Spending Requirement Can Be Met With:|
|AUM < S$50 million||S$200,000||At least S$200,000 of local business spending|
|S$50 million ≤ AUM < S$100 million||S$500,000||
At least S$200,000 of local business spending,
Total spending: ≥S$500,000
|AUM ≥ S$100 million||S$1 million||
At least S$200,000 of local business spending,
Total spending: ≥S$1 million
|Capital Deployment Requirement (CDR)
Investments into any of the options below will be offered a multiplier during the computation of whether the CDR has been achieved
|1.5 times||Concessional capital in mixed finance structures with significant involvement of Singapore’s financial institutions|
How Will This Impact Funds in Singapore?
These new conditions are stricter compared to previous standards set for Single family offices offices. At a surface level, this may appear to go against Singapore’s long-standing business-friendly stature.
While these conditions may appear harsher, this is far from the case. The Family Office industry has grown and expanded rapidly since 2019. Singapore has become the preferred base for high net worth individuals (HNWIs) to set up family offices. Singapore’s banking and finance sector has long been globally recognized as one of the best in the world, and measures must be taken to ensure that funds approved to operate in Singapore are of the highest standard, so that Singapore can continue to enjoy this well-deserved status.
Eric Chin, InCorp Global’s Chief Business Development officer, believes this is a masterstroke by the Singapore Government:
The refreshed conditions for SFOs is a way for the Singapore government to ensure that HNW families that enjoy the SFO tax incentives in the country create long-term substance and economic benefits that can bring about employment of locals and increase investment activities for Singapore companies. The newly added conditions to count donations into Singapore registered charities and grants given to blended finance structures to help SFOs meet minimum business spending conditions are much welcomed, this widens the ways SFOs can bring about benefits for Singapore on a more wholesome basis.
Regardless of your views on these new regulations, they only serve to protect consumers by ensuring that the funds operating in Singapore are of the highest standard. If you would like to learn more about setting up a Single Family Office in Singapore, InCorp Global is always ready to support you. As a full-suite corporate business solutions provider, we have the expertise to support family offices and help HNWIs and their families to use Singapore as their base to manage their wealth. If you would like to learn more, please feel free to contact us.