Tax for Fund Management Companies

Singapore's headline corporate tax rate is a flat 17%.
Singapore operates a territorial Tax system. Generally, income accrued in or derived from Singapore or received from outside Singapore is taxable, unless the income was already subjected to taxes in a jurisdiction with headline tax rates of at least 15%.
The tax on foreign income received in Singapore applies only if the income belongs to an individual* who is resident in Singapore or an entity that is located in Singapore.

Taxable income includes the following:

• Gains or profits from any trade or business
• Income from investment such as dividends, interest and rental
• Royalties, premiums and any other profits from property
• Other gains that are revenue in nature

13D - Offshore Fund Tax Exemption Scheme
This is applicable to a Singapore based fund manager, delegated a mandate to manage a small portion of the overall assets of a global fund, in an offshore company, trust or foreign individual.

13O- Singapore Resident Fund Scheme
This is applicable to a Singapore based fund manager, managing funds with AUM of $10m up to $50m in an on shore entity or Company incorporated in Singapore

13U - Enhanced-Tier Fund Tax Incentive Scheme
This is applicable where a Singapore based fund manager is managing funds with AUM in excess of $50m in an onshore or offshore entity, trust or partnership.

According to MAS (Pages),
last updated on 14 May 2019

The Financial Sector Incentive (FSI) Scheme applies to licensed financial institutions, from large universal banks, fund managers to capital market players.

Interested Applicants will have to demonstrate plans to anchor and grow their operations in Singapore. Successful incentive applicants are subject to annual reviews which takes into consideration the following:

• Headcount growth in key business functions.
• Growth or expansion in business activities, for example through new product lines, new functions or expansion of geographical market coverage.
• Economic contributions to other sectors.
• Incentivised income is commensurate with economic activities performed in Singapore.

According to IRAS,

Claiming GST on Expenses for Qualifying Funds
Funds (including Variable Capital Companies (“VCCs”)) may incur GST when the fund procures services (e.g. fund management service) from GST-registered businesses. A GST remission is granted until 31 Dec 2024 to allow funds that meet qualifying conditions to claim the GST incurred.

To simplify the rules for claiming GST incurred, funds that meet all the qualifying conditions are allowed to claim GST incurred on expenses, with the exception of disallowed expenses under the regulations 26 and 27 of the GST (General) Regulations, at an annual fixed recovery rate.

Qualifying conditions

To qualify for the GST remission, the funds must:

1. be managed by a prescribed fund manager in Singapore; and
2. satisfy the conditions for specific income tax concessions as at the last day of their preceding financial year*.

*The commencement date of the GST remission for the fund is the effective date of the GST remission or the date that the fund is granted approval for the specific income tax concession, whichever is later. The end date of the GST remission for the fund is the last day that the fund qualifies for the specific income tax concession.

An administrative concession is granted to allow newly set-up funds to claim the GST incurred in the first year provided they meet the specific income tax concession at the end of the first year.

13O
Family offices under the S13O scheme must incur a minimum total business expenditure of S$200,000 (US$146,000) per year. This is governed by a tiered framework based on the value of the AUM.

13U
Unlike the S13O scheme, family offices under the S13U scheme must incur a minimum local business spending of S$500,000 (US$(US$366,000).
For the local business spending requirements, expenses incurred should relate to the operating activities of the fund, as opposed to financing activities.

Local investments may include:

1. equities listed on Singapore-licensed exchanges;
2. qualifying debt securities;
3. funds distributed by Singapore-licensed/registered fund managers; and/or
4. private equity investments into non-listed Singapore-incorporated companies (e.g., start-ups) with operating business(es) in Singapore.
   Note that there will be a one (1) year grace period to make the local investments.

According to IRAS,

Generally, business spend refers to expenses which are wholly and exclusively incurred in the production of income:

• The expenses are solely incurred in the production of income.
• The expenses are not a contingent liability i.e. they do not depend on an event that may or may not occur in the future. In other words, the expenses must be incurred. An expense is 'incurred' when the legal liability to pay the expense arises, regardless of the date of actual payment of the money.
• The expenses are revenue, and not capital, in nature.
• The expenses are not prohibited from deduction under the Income Tax Act.
  

The first year Business Spend ("BS") or Local Business Spend (“LBS”) basis is pro-rated based on the incentive commencement date,

For example if your incentive start date is 11/04/2022 and Year End 30 Sep 2022

• BS Period for YA2023 = 11/04/2022 to 30/09/2022 (173 Days inclusive)
• BS or LBS = Number of days from incentive commencement date (173 / 365) x S$200,000 = ~$94,795

For the next Year: YA2024 = 01/10/2022 to 30/09/2023 (365 days)
LBS = S$200,000