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What are the Tax on Funds and Fund Managers in Singapore
For a number of years, Singapore has been a preferred location for setting up fund vehicles (“funds”) in the Asia Pacific region. This, in turn, has contributed to the growth of the fund management industry in Singapore.
There are several factors for the attractiveness of Singapore, such as the stability and business friendly environment. But not least, one important aspect is the attractive tax regime for funds and fund managers.
In recent times, with the introduction of the OECD’s Base Erosion and Profit Shifting (“BEPS”) initiatives, many tax havens where funds were previously set up, are increasingly losing their gleam.
With this change in the global tax climate, coupled with efforts by the Singapore government to develop the fund management industry by allowing the re-domiciliation of foreign companies to Singapore, as well as introducing the Singapore Variable Capital Company framework, Singapore could be considered one of the foremost attractive locations for fund domiciliation and fund management.
What is the Tax Regime for Funds and Fund Managers?
When a Singapore based fund manager manages the investments of a fund, its activities could create a taxable presence in Singapore for the fund, regardless of whether the fund is onshore or offshore. Hence, income and gains derived by the fund may be considered as sourced in Singapore liable to tax in Singapore. The following tax incentive schemes can mitigate the Singapore tax liability of the fund, provided the conditions for the schemes are met.
Under the tax incentive schemes, certain “specified income” derived by the fund from “designated investments” is exempt from tax. The exemption covers income from a wide range of investments.
A broad overview of the three tax exemption schemes is described below. The outline of the schemes should not be treated as complete tax analysis or advice. We recommend that specific tax advice is obtained for any intended fund-related activities in Singapore.
The Offshore Fund Tax Exemption Scheme
- The fund can include companies, trusts and individuals, but excludes partnerships.
- The fund should not be resident in Singapore and should not have any presence in Singapore.
- Non-qualifying investors (i.e. Singapore non-individuals who invest above a certain percentage) have to pay a penalty (effectively a tax).
- No approval required from the MAS for this tax exemption scheme.
The Onshore Fund Tax Exemption Scheme
- The fund has to be a company (including variable capital company) incorporated and resident in Singapore.
- The fund should incur at least S$200k of business spending and engage a Singapore fund administrator.
- Non-qualifying investors (i.e. Singapore non-individuals who invest above a certain percentage) have to pay a penalty (effectively a tax).
- Approval required from the MAS.
- Fund can access Singapore’s tax treaty network.
The Enhanced Tier Fund Exemption Scheme
- The fund can be constituted in all forms (such as trusts, partnerships and companies, including variable capital companies).
- The scheme can accommodate various master-feeder-special purpose vehicle structures, as well as managed accounts.
- The fund should have a minimum fund size of S$50 million, incur at least S$200k of local business spending and engage a Singapore fund administrator.
- There is no investor restriction.
- Approval required from the MAS.
What are the Singapore Fund Management Incentives?
Under the Financial Sector Incentive-Fund Management Scheme, a concessionary tax rate of 10% is applicable on fees derived by an approved Singapore fund manager from the provision of fund management or investment advisory services to qualifying funds.
There are certain general qualifying criteria to be met for this incentive, and it is subject to the approval of the MAS. The MAS will consider factors such as the assets under management, professional headcount and business spending by the applicant.
How InCorp Can Help
We can assist fund managers and funds on the Singapore tax matters in the following ways:
- Advise on the set-up of the Singapore fund manager and its ongoing operations.
- Advise on the set-up of the fund entities which are managed by the Singapore fund manager.
- Assist in complex tax considerations in structuring of the funds to achieve tax efficiency.
- Assist the funds and fund managers with their application for tax incentives, and liaising with the MAS on the applications.
- Assist in the review of fund documents so that they are aligned with the tax profile of the funds and the fund managers.
- Advise on the Singapore GST implications to the fund and the Singapore fund manager
- Advise on the tax implications arising from investments made by funds, as well as the tax efficient structuring of such investments, e.g., for private equity, real estate, infrastructure funds, etc..
- As fund structures are commonly used by family offices, we can assist family offices in structuring their investment platforms, and in the application for the tax incentives.
- Provide annual tax return preparation and filing services for the funds and fund managers.
Contact our Team:
We offer integrated and customised solutions to address your fund management needs. Our teams of dedicated regulatory compliance and tax specialists have significant commercial knowledge and experience, coupled with a deep understanding of industry practices.