Setting up a Single Family Office (SFO) in Singapore

Singapore is regarded as one of the most prominent financial centres in South-East Asia and has gained in popularity as a base for many high-net-worth families to manage their assets and investments globally.

Singapore enjoys a reputation as a well-governed and well-regulated financial centre that offers political stability and a pro-business environment, as well as the presence of local and global banks, and other financial service providers and professionals.

As a result, the Monetary Authority of Singapore (MAS) estimates there are now upwards of 200 Single Family Offices (SFOs) in Singapore, managing assets in excess of USD20 billion. The term ‘single family office’ is not formally defined but the term generally refers to an entity that manages assets for or on behalf of a family, and which is also wholly owned or controlled by the members of that same family.

An SFO typically conducts various activities to facilitate the day-to-day management of a family’s assets. The activities involved are diverse and would include investment management, consolidation of the family’s accounts and tax filing.

SFOs usually employ small teams of trusted advisors and investment professionals, and also generate indirect employment in Singapore through their engagement of external finance, tax and legal professionals for advice on wealth planning and operational matters.

Singapore has a highly competitive tax system. The corporate tax rate of 17% is imposed on income that is either Singapore sourced or is remitted into Singapore. Singapore does not tax capital gains or inheritances and the basis of taxation is further reduced by a number of exemptions. There is a goods and services tax (GST) remission for qualifying tax-exempt vehicles to recover GST incurred on expenses for the purpose of investment activities.

For corporate resident taxpayers, foreign dividends that have been subject to some foreign tax and are paid from a jurisdiction with a headline rate of at least 15% are exempt. Dividends paid by a Singapore resident company are exempt from further taxation. Singapore also has a large network of double taxation agreements that can reduce taxation at source on certain types of income and gains.

The Singapore government has put in place a number of tax incentives schemes for funds managed by family offices for both offshore and onshore vehicles. These require a Singapore manager that is either licensed or exempt under local securities law for providing fund management services. An SFO is typically structured as a ‘related corporation’ of the family fund vehicle so that it is exempt from regulation. An exemption from licensing can also be granted to an SFO that can demonstrate that it only manages the assets of the same family.

Specific tax exemption incentives for funds managed by family offices are available for both Singapore resident and non-resident (offshore) fund vehicles, such that almost all investment gains will be exempt from Singapore income tax. These include:

• Non-Resident Fund Exemption – Section 13CA
• Resident Corporate Fund Exemption – Section 13R
• Enhanced Tier Fund Incentive Schemes – Section 13X

Funds that are approved for the above tax incentive schemes before 31 December 2024 can enjoy the benefits of the scheme for the life of the fund, provided that the on-going operational conditions for the entities are met. Successful applicants will also be granted a specific number of employment passes, which can offer an interim solution pending permanent residency applications.

They can also utilise the new Variable Capital Company (VCC) structure. A VCC can be set up as a standalone fund, or as an umbrella fund with two or more sub-funds. A VCC structure is regarded as a single company, with a single identity for tax purposes, removing the need for multiple tax returns. Shares of a VCC are redeemable at the fund’s net asset value (NAV), and VCCs can pay dividends from the capital, which is not typically allowable in other forms of corporate vehicles. In addition, VCC shareholders register will not be publicly available, offering privacy to investors.

Family offices in Singapore can also apply for a tax incentive under the Financial Sector Incentive – Fund Management Scheme (FSI-FM) – which incentivises fund management and the provision of investment advisory services in Singapore. Under this scheme, fee income derived by a Singapore fund manager from managing or advising a qualifying fund is taxed at a concessionary tax rate of 10%, rather than the normal corporate tax rate of 17%.

To qualify for the FSI-FM scheme, a fund manager must hold a Capital Markets Services (CMS) licence (unless exempted by the MAS), employ at least three experienced investment professionals earning at least S$3,500 per month and have a minimum AUM of S$250 million. This is especially relevant for large family offices, where the scale of operations and the income derived from managing or advising qualifying funds could be substantial.

The Global Investor Programme (GIP), which offers Singapore Permanent Resident (PR) status to eligible global investors, includes an option that is specifically designed for family offices. Eligible investors must invest at least S$2.5 million (paid up capital) in a Singapore-based SFO that has AUM of more than S$200 million and maintain the investment for at least five years.

To qualify under this option, investors must have at least five years of entrepreneurial, investment or management track record and, as an individual or direct family, have net worth of more than S$400 million. Investors must also submit a five-year business plan outlining projected employment and annual financial expenditures, which should set out the functions of the family office, proposed investment sectors, asset types and geographical focus.

Sovereign is fully equipped to advise and assist clients who are interested in taking advantage of Singapore’s highly beneficial regime for SFOs in respect of the following services:

• Incorporating holding company, fund management company and fund vehicles, including submissions to the Accounting & Corporate Regulatory Authority (ACRA), performing required due diligence on proposed directors, shareholders and officers, and handling further enquiries;
• Collating and submitting all required documentation to MAS for an SFO exemption, including preparation of shareholding and organisational charts and performing due diligence on proposed directors, shareholders and ultimate beneficial owners (UBOs), and handling further enquiries;
• Collating and submitting all required documentation to MAS in respect of applications for Section 13CA, Section 13R and Section 13X tax exemption incentives, and handling further enquiries;
• Collating and submitting all required documentation to the Ministry of Manpower (MOM) in respect of Employment Pass applications, and handling further enquiries;
• Provision of independent / nominee directorship services;
• Provision of company secretarial services, including preparation and filing of annual returns, holding of Annual General Meeting (AGM), declaration and distribution of dividends and reporting changes to any particulars;
• Provision of accounting and bookkeeping services, including submitting MAS regulatory returns, and Corporate Income Tax returns and GST filings to the Inland Revenue Authority of Singapore (IRAS);
• Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) registrations with IRAS;
• Assistance with Employment Pass renewals, individual tax filing and GST remission on an annual basis.

The Request for Information (RFI) for a SFO application in Singapore will include:

• Projections for SFO budget and costs
• Motivation for setting up SFO in Singapore
• Nature of activities to be carried out by SFO
• Information on type of assets to be managed and estimated fund size of SFO
• Details of proposed investment strategy of SFO
• Details of proposed succession plan of SFO
• Profile of the family, including details on source of wealth and source of funds
• Copies of Passport / National Registration Identity Card (NRIC) for principal applicant, proposed directors and shareholders
• List of beneficiaries with copies of their passport / NRIC