Singapore tightens tax incentive criteria for Single Family Offices

The Monetary Authority of Singapore (MAS) has announced stricter criteria for the Singapore Resident Fund Scheme and Enhanced-Tier Fund Tax Exemption Scheme tax incentives, provided for under sections 13O and 13U of the Income Tax Act 1947 (ITA) respectively, for fund vehicles managed by single family offices (SFOs).

The changes, which have not yet been officially published, are scheduled to come into force for new applications as of 18 April 2022. SFOs with existing s13O or s13U status, or those with applications already underway, should not be affected.

Changes for s13O applications are as follows:

• Minimum fund size of SGD10 million (c. USD7.5 million) at point of application and assets under management (AUM) required to increase to SGD20 million within two years. Previously, no minimum AUM applied.
• Family Office must employ a minimum of two investment professionals (IPs). Previously, no minimum number of employees applied.
• Minimum total annual business expenditure to remain at SGD200,000, but subject to new ‘tiered business spending framework’ in relation to AUM size*.
• New requirement for at least 10% of a fund’s AUM or SGD10 million, whichever is lower, to be comprised of ‘local investments’** at any one point in time.

Changes for s13U applications are as follows:

• Existing minimum fund size of SGD50 million at point of application remains unchanged.
• Family Office must employ a minimum of three IPs, including at least one non-family member. Previously, there was no non-family member requirement.
• Minimum total annual business expenditure increased from SGD200,000 to SGD500,000, and subject to new ‘tiered business spending framework’ in relation to AUM size*.
• New requirement for at least 10% of a fund’s AUM or SGD10 million, whichever is lower, to be comprised of ‘local investments’** at any one point in time.

“The increased criteria to obtain SFO status in Singapore is a welcome move because it will ensure that Singapore’s reputation as a global financial centre is both maintained and enhanced,” said Andrew Galway, Managing Director of Sovereign Management Services in Singapore. “It will also help facilitate the adaption of the new Variable Capital Company (VCC) fund structure by SFO’s, as and when this is introduced.”

* Above the minimum thresholds, the ‘tiered business spending framework’ stipulates total annual business expenditure of at least SGD500,000 for both s13O and s13U grantees with AUM between SGD50 million and SGD100 million, and at least SGD1 million for those with AUM of more than SGD100 million.

** Local investments include: equities listed on Singapore-licensed exchanges; qualifying debt securities; funds distributed by Singapore-licensed/registered fund managers; private equity investments into non-listed Singapore-incorporated companies with operating business(es) in Singapore.