Family office surge in Singapore could slow

Singapore has tightened the requirements for family offices in the Asian financial hub. These family offices can apply tax incentives for funds vehicles they manage or advise. The new rules are intended to increase fund sizes, improve the expertise of fund managers, and direct investments into local economies. Singapore is known for being a popular destination for ultra-high-net-worth families looking to professionalize wealth management.

According to the Monetary Authority of Singapore(MAS), approximately 200 Single Family Offices manage assets worth more than USD20bn. Singapore family offices must 家族办公室 comply with stricter criteria to qualify for tax incentives. The MAS stated that it would like its policies, regulations, and incentive systems to align with the family office’s ambitions. It said, “As Singapore’s family-office eco-system matures and becomes more professional, we want to increase the professionalism and positive spillovers to Singapore.”

Generally, applications for tax incentives by Singapore-registered families offices approved or acknowledged by the MAS before 8 April 2022 will remain unaffected. These updated requirements will apply for all new applications made to the MAS after 18 April 2022.

The new rules complicate qualifying for the Section 13O or 13U tax incentive programs. Section 13O only applies to local fund entities. Section 13U applies to Singapore and offshore incorporated funds entities. Singapore’s family offices have exploded in recent years due to the rise of smaller funds. Hong Kong is now introducing new rules allowing single-family offices to be exempted from tax, and Singapore is tightening its regulations. Hong Kong could see a significant boost from removing all restrictions regarding virus travel.

Recently, the MAS published a notice on updated guidelines for Section 13O (formerly 13, R) Tax Incentive schemes under the Income Tax Act 47 (the s13O & s13U Schemas) for the family offices in Singapore. These changes were made to acknowledge the growth of the Singapore family office system.

The fund must be managed directly by a Singapore family office, which employs at most three Investment Professionals. Additionally, at least one Investment Professional must not be related to the beneficiaries. Here, the same definitions of “family” are used as discussed. A one-year grace period is granted to the fund if the family office cannot employ one non-family member to be an Investment Professional at the time of application.

Additionally, Investment Professionals must be tax residents in Singapore. These changes reflect MAS’ intention to encourage family offices to hire Singaporeans to take on the role of Investment Professionals and increase professionalism in Singapore.

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