1. Introduction
Singapore stands out as a premier international business hub. It is well-regarded for its exceptional regulatory environment and attractive tax benefits especially for high-net-worth (HNW) individuals and families. With its strong reputation for safety and stability, Singapore is an attractive jurisdiction for wealth preservation and provides ample personal and financial opportunities for its residents. Therefore, the affluent who are seeking both physical security and business opportunities highly value the benefits of Singapore permanent residency and citizenship.
A key component of wealth management for high-net-worth families is the Single Family Office (SFO), an entity incorporated specifically to manage the financial and personal affairs of a family. Unlike a Multi-Family Office (MFO), which provides wealth management services to several families, an SFO offers a bespoke approach, aligning investment strategies and financial decisions closely with the family’s objectives, values, and legacy.
The focus of this article is to guide our readers through the steps involved in establishing an SFO in Singapore and the benefits of doing so. It also aims to offer a comprehensive overview of the legal processes, tax exemption schemes, and regulatory framework to establish a family office. As each family’s needs differ, there are various legal considerations to take into account, making the setup of an SFO a process uniquely tailored to each family.
We hope that this article will be a good starting point for you to gain a solid understanding of Singapore’s legal landscape in wealth management.
If there are any suggestions and/or legal queries on the setting up of an SFO in Singapore, please contact the author, Waltson Tan, at: waltson.tan@28falconlaw.com
2. Benefits of a Singapore SFO
Attractive Section 13O and Section 13U Tax Incentives
The resident fund exemption scheme and the enhanced tier fund exemption scheme were introduced by the Singapore government to provide attractive tax benefits for high-net-worth (HNW) families. These schemes are regulated under section 13O and section 13U of the Income Tax Act 1947 of Singapore (ITA 1947) respectively.
The key benefit of qualifying for either of these exemptions is that most investment gains derived by the SFO, whether passive or trading income, would be exempted from Singapore tax. Without these incentives, trading income and gains derived from investment activities may be subject to individual and/or corporate income tax of up to 24% and 17% respectively. Therefore, SFOs that meet the criteria for tax exemptions under either of those schemes would typically be advised to apply to the Monetary Authority of Singapore (MAS) for approval to receive such tax incentives.
For completeness, another tax exemption scheme (the offshore fund exemption scheme), is provided pursuant to section 13D of the ITA 1947 but it would not be further discussed in this article as MAS’ prior approval is not required to qualify for this incentive.
Philanthropy Tax Incentives
SFOs which qualify for the Philanthropy Tax Incentive Scheme under Section 13O or Section 13U of the Income Tax Act can claim up to a 100% tax deduction on qualifying overseas donations through local intermediaries with a cap of 40% of their income for five years.
3. How 28 Falcon Law Can Assist
Setting up an SFO involves the making of a series of crucial decisions which can range from determining the family’s objectives to ensuring compliance with Singapore’s regulatory frameworks. Our expertise is to walk with you through each of these decision points and assist you in making well-informed decisions.
(a) Provide initial advisory to assist you with choosing a suitable family office structure
It is essential for us to understand your key objectives when establishing an SFO and we do so during the initial advisory stage and in the course of the entire project. Whether it is to implement a tax-efficient structure to maximise your wealth, preserve your wealth, plan your succession and/or assist you in the process of gaining citizenship or permanent residence status in Singapore, we are confident in recommending you an SFO structure that specifically caters to your needs.
Selecting a suitable structure for an SFO would require considerations as to operational flexibility and regulatory compliance. Two of the most common structures are holding company and trust structures. A holding company structure centralizes control by directly owning funds in both the family office and the fund entity. Alternatively, a trust structure focuses on long-term goals such as succession planning, asset protection, and confidentiality.
(b) Navigate Regulatory Compliance Requirements
(i) Registering an SFO
Establishing an SFO may require the incorporation of a corporate entity, which can be done through the Accounting and Corporate Regulatory Authority of Singapore (ACRA). The structure chosen should align with the family’s operational needs and regulatory requirements. Our firm can guide you through the process and handle the necessary paperwork for you.
(ii) Considering Whether Licensing Exemption Apply
If the SFO is structured as a trust, the family office may qualify for an exemption from the capital markets services (CMS) license under the Securities and Futures Act 2001 (SFA), provided it solely manages the family’s funds and assets. We are able to assist you in determining whether obtaining licensing approval is required for the operation and if so, guide you in obtaining the necessary licenses.
(iii) Opening a Bank Account
Commonly, we would recommend our clients to open a corporate bank account in Singapore to enable efficient management of funds and investments that have a nexus to Singapore.
(c) Applying for Section 13O and Section 13U Tax Incentives
For SFOs that have funds of at least S$20 million in assets under management (AUM), we are able to assist with the application of section 13O exemptions. If your SFO has an AUM of at least S$50 million, we are able to assist you in applying for the section 13U exemptions.
Section 13U exemptions are more suitable for larger family offices seeking to accommodate a wider array of investments due to the availability of onshore and offshore funds.
Both the section 13O and section 13U tax exemption schemes require MAS approval. Regardless of which exemption you are seeking, we are able to assist you in preparing the required documentation to obtain approval for each scheme.
4. Key Criteria to Attain Section 13O and Section 13U Exemptions
Some of the key criteria to qualify for tax exemptions under each of the section 13O and section 13U are stated below:
| Criteria / Exemption | Section 13O | Section 13U |
| Minimum Assets under Management (AUM)
*Note that the minimum AUM must be satisfied at the point of application and throughout the incentive period. |
S$20 million | S$50 million |
| Minimum Investment Professionals (IP)
*Note that the hiring of investment professionals by the family office must be satisfied at the point of application and throughout the incentive period. |
2 IPs (at least 1 non-family member of beneficial owner(s) | 3 IPs (at least 1 non-family member of beneficial owner(s) |
There are further tiered business spending requirements, which are set out in the table below:
| AUM Thresholds | |||
| SFOs with AUM of less than $50 million must incur a minimum total local business spending of S$200,000 | SFOs with AUM between S$50 million and S$100 million must incur a minimum total local business spending of S$500,000 | SFOs with AUM more than S$100 million must incur a minimum total local business spending of S$1 million | |
| Total minimum spending requirement of each Year of Assessment which may comprise the following: | |||
| 1. Minimum local business spending | At least S$200,000 | At least S$200,000 | At least S$200,000 |
| 2. Donations | N.A. | Eligible donations to local charities | Eligible donations to local charities |
| 3. Grants | N.A | Grants to blended finance structures (recognized as 2x spending) | Grants to blended finance structures (recognized as 2x spending) |
Whilst our firm does not provide specific tax advice, we are able to recommend tax advisers whom we have worked with to provide you with tax advice.
5. Conclusion
Establishing an SFO in Singapore ultimately involves making multiple complex decisions such as choosing a suitable family office fund structure, submitting documents to the relevant authorities, and preparing for and attending MAS interviews. Thus, we would highly recommend you to consult reliable, experienced and trusted advisors to guide you in your journey should you decide to embark on this endeavour. Our firm works closely with our clients to address every aspect of the entire process.
Our commitment to our clients is to provide an organised, streamlined process so that you and your family can enjoy these tax benefits without navigating the complexities of regulatory intricacies.
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The author, Waltson Tan, is a corporate lawyer based in Singapore. He is qualified as an advocate and solicitor in Singapore and has more than eight years of post-qualification experience, including advising clients of top international and local law firms on corporate law and employment law-related matters.
Waltson also practises in the areas of mergers and acquisitions, private equity, joint ventures, investment funds, and other general corporate and commercial transactions. He has also represented numerous leading multinational organisations on a broad spectrum of corporate, regulatory, cross-border restructuring and employment matters.
Prior to joining the firm, Waltson practised at some of the top law firms in Singapore and thereafter, at a leading international law firm, which was the second largest law firm in the United States and one of the ten largest in the world.
If you require further information and/or expert guidance on the above or any other area of law, you may wish to contact the author of the article, whose details are as follows:
Waltson Tan Director +65 8079 0028 waltson.tan@28falconlaw.com |
Office address: 101A Upper Cross Street #13-11, People’s Park Centre Singapore 058358 |