EXTERNAL ASSETS MANAGEMENT
What is a Single-Family Office?
SFO Regulatory Requirements in Singapore
Although fund management companies in Singapore are generally required to be licensed by the Monetary Authority of Singapore (“MAS”), the Securities and Futures Act (Cap 289), read together with the Financial Advisers Act (Cap 110), provides exemptions for SFOs engaging in fund management and financial advisory activities from licensing requirements. For instance, under the statutory exemptions, an SFO may be exempted from licensing requirements if it was structured as either (a) a corporation which manages funds for its related corporations, or (b) a corporation that provides financial advisory services to its related corporations.
In other words, SFOs performing such regulated activities will not need to be licensed by MAS. Furthermore, in the event that an SFO does not fall within the stipulated exemptions squarely, MAS has indicated its willingness to consider granting exemptions on a case by case basis. Typically, MAS will consider the following to be SFO arrangements:
- Where there is no common holding company, but the assets managed by the SFO are directly held by natural persons of a single-family;
- Where assets are held under a discretionary trust, the settlor of the trust and the beneficiaries are members of the same family;
- Where a family trust is set up for charitable purposes, the charitable trust is funded exclusively by settlor(s) from a single-family; and
- Where non-family members such as key employees of the SFO are shareholders in the SFO for the purpose of alignment of economic interest and risk-sharing, the initial assets and additional injection of funds are funded exclusively by a single-family.
SFO Regulatory Requirements in Singapore
Tax Schemes and Incentives in Singapore
Singapore has several tax incentive schemes under the Income Tax Act (Cap 134) (“ITA”) that are available for funds managed by family offices which allow for onshore and offshore family investment vehicles to be exempted from income tax on certain designated investments:
1. Offshore Fund Tax Exemption Scheme (Section 13CA of ITA);
2. Onshore Fund Tax Exemption Scheme (Section13R of ITA); and
3. Enhanced Tier Fund Tax Exemption Scheme (Section13X of ITA)
Tax Incentive Schemes | Section 13R Schemes | Section 13X Schemes |
Fund’s Residence(1) | Singapore tax resident | No restrictions |
Assets under Management (AUM) | No minimum sum at the point of application | Must have a minimum of SGD50 million at point of application |
Fund Expenditure | At least S$200,000 local business spending in a year | At least SGD200,000 local business spending in a year. |
Fund Administrator | Singapore-based | Singapore-based |
Shareholding / Investors | Pursuant to Section 13R of the ITA, non-qualifying investors (i.e. Singapore non-individuals investing above a certain prescribed percentage in the fund) will be required to pay a financial penalty to IRAS | No restrictions |
Approval Requirement | MAS approval required for tax exemption scheme to apply (no change of investment mandate after approval) | MAS approval required for tax exemption scheme to apply (no change of investment mandate after approval) |
Reporting Requirement | Annual statements to investors | Not required |
Income Tax Filing | Must file annual tax returns to IRAS | Must file annual tax returns to IRAS |
Annual Declaration to MAS | Required | Required |
(1) “Fund” in the table above refers to the investment vehicle(s) managed by an SFO.
Sections 13R and 13X schemes also allow family members who join the family office as investment professionals to apply for an Employment Pass in Singapore
Note: one pass per s13R entity and three pass per s13X entity (subject to approval by relevant authorities).
All funds that qualify for any of the abovementioned tax incentive schemes as at 31 December 2024 may enjoy the tax exemption for the life of the fund (provided that the on-going operational conditions are met).
Lastly, Singapore has over 100 Avoidance of Double Taxation Agreements available to family offices which allows certain types of income to be taxed less or even exempted.
