Nature of Single Family Offices (SFOs)
Changes to the Tax Incentive Schemes for Family Offices in Singapore
On 11 April 2022, the Monetary Authority of Singapore (“MAS”) has updated the conditions and procedural requirements for a new set of guidelines titled “S13O & S13U Application Process for Family Offices – Guidelines for Advisors” (the “New Guidelines”).
The rationale for the updates to the New Guidelines are to recognise that the family office eco-system in Singapore has grown and matured over the past few years, and the applicable regulations, policies, and incentives are now dated and should be updated accordingly.
The New Guidelines are effective from 18 April 2022 and will apply to fund vehicles that are managed or advised directly by a family office which:
- Is an exempt fund management company who manages assets for or on behalf of the family/families; and
- Is wholly owned or controlled by members of the same family/families
Some of the key changes to the Guidelines are as follows:
| Requirements /Applicability |
Section 13O (formerly Section 13R) of the Act |
Section 13U (formerly Section 13X) of the Act |
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| Current scheme | Changes | Current scheme | Changes | |
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Who is it applicable for? |
The Singapore Resident Fund Scheme, or Section 13O of the Act, exempts from tax the income earned by a Singapore-incorporated or variable capital company arising from investments in funds managed throughout each basis period in any year of assessment by a family office in Singapore. The company’s issued securities must not all be beneficially owned by Singapore persons too. Replacement from 13R to 13O |
The Enhanced-Tier Fund Tax Exemption Scheme, or Section 13U of the Act, exempts from tax the income arising from funds managed by a Singapore-based fund manager/family office. Replacement from 13X to 13U |
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Minimum Assets Under Management |
No restrictions |
a) The fund has a minimum fund size of S$10 million at the point of application. b) The fund commits to increasing its AUM to S$20 million within a 2-year grace period. |
Min. of $50mio at the point of application |
No change |
|
Minimum number of investment professionals |
No existing requirement |
The family office must have at least two investment professionals employed at the point of application, and will be given a one-year grace period to employ the second investment professional if it fails to do so by the point of application |
The family office must have at least three investment professionals employed at the point of application. |
The family office must have at least three investment professionals employed at the point of application, with at least one investment professional being a nonfamily member, and will be given a one- year grace period to employ one nonfamily member as an investment professional if they are unable to do so by the point of application. |
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Minimum annual business spending |
The family office must incur a minimum annual business spending of S$200,000. |
The family office must incur a minimum annual business spending in accordance with the following framework:
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The family office must incur a minimum annual business spending in Singapore of S$200,000. |
The family office must incur a minimum annual business spending in accordance with the following framework:
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Mandatory spending in local investments |
No existing requirement |
No existing requirement |
No existing requirement |
The fund managed by the family office must invest at least 10% of its AUM or S$10 million, whichever is lower, in local investments at any one point in time. An additional one- year grace period will be granted if any of the above requirements are not met by the point of application. |
These New Applications are not applicable for the following situations:
- Applications which have submitted preliminary information before 18 April 2022 and with correspondences with the MAS in the last six months;
- Applications that the MAS had received formal MASNET application before 18 April 2022, but approved after 18 April 2022; or
- Applications which were formally approved, with the issuance of a formal letter of offer from the MAS, before 18 April 2022.
Please feel free to contact us should you have questions regarding the updated conditions for the S13O and/or S13U Schemes.