Introduction to Family Offices in Singapore
Singapore has emerged as a leading destination in Southeast Asia for business and investment opportunities. This development is largely attributed to the proactive and intentional efforts of the Singapore government to establish a conducive business environment through solid corporate laws. The nation’s appeal to High-Net-Worth Individuals (HNWIs) is further enhanced by its accessible local and international private and investment banking facilities.
The concept of family offices has gained significant traction in Singapore, particularly among HNWIs. A family office is a private wealth management advisory firm catering to the investment and management needs of ultra-high-net-worth individuals. In Singapore, these are typically categorized into Single Family Offices (SFOs) and Multi-Family Offices (MFOs). The Monetary Authority of Singapore (MAS) and the Economic Development Board (EDB) are the regulatory bodies overseeing the operation of SFOs in the country. Currently, there are approximately 200 SFOs in Singapore, each playing a pivotal role in managing the assets of wealthy families.
Types Of Family Offices in Singapore
While there is no universally accepted definition, the core functionality of a family office is to manage and preserve the wealth of affluent families. In Singapore, family offices take on two primary forms: Single Family Offices (SFOs) and Multi-Family Offices (MFOs).
Single Family Offices (SFOs)
SFOs are established to manage the wealth and investments of a single family. They handle a range of activities including investment management, tax planning, estate planning, and philanthropic endeavours. The family members themselves often actively participate in the management of the SFO.
Multi-Family Offices (MFOs)
Contrastingly, MFOs cater to the needs of multiple families. They offer similar services as SFOs but serve a broader client base. MFOs provide an advantage for families looking for shared expertise and resources without the need to establish their own private office.
Regulatory Framework
In Singapore, the Monetary Authority of Singapore (MAS) and the Economic Development Board (EDB) regulate the activities of these family offices. The regulatory framework ensures that family offices operate within the bounds of financial and legal compliance, maintaining Singapore’s reputation as a transparent and reliable financial centre.
Functions of a Single-Family Office
Single Family Offices (SFOs) in Singapore perform a multitude of functions to manage and enhance the wealth of high-net-worth families. These functions encompass a wide range of services, tailored to meet the unique financial and personal needs of the family they serve. Key functions of SFOs include:
Investment Management
- Portfolio investment management: Handling a diverse range of investments including stocks, bonds, and other securities.
- Private equity and venture capital investments: Investing in private companies or startups.
- Real estate management: Managing property investments, both residential and commercial.
Administrative Services
- Account consolidation: Aggregating financial information from various sources for clarity and comprehensive analysis.
- Asset custody and aggregation: Safekeeping and management of financial assets.
- Concierge services: Personalized assistance with travel, lifestyle, and other personal requirements.
- Cash flow, expense, and payroll management: Overseeing financial operations and transactions.
Tax Services
- Tax compliance: Ensuring adherence to tax laws and regulations.
- Tax planning: Strategic planning to minimize tax liabilities.
- Tax filing: Preparing and submitting tax documents.
Legal Services
- Legal advisory and structuring: Offering guidance on legal matters related to investments and wealth management.
- Banking investments, M&A contracts: Facilitating and managing banking and investment transactions, mergers, and acquisitions.
- Trusts and fiduciary structures: Establishing and managing trusts and other legal structures for asset protection and succession planning.
Wealth Transition & Legacy Planning
- NextGen education: Educating the younger family members on wealth management and succession planning.
- Family governance/constitution planning: Establishing guidelines and structures for family governance and decision-making.
Philanthropy
- Grant-making: Funding charitable projects and causes.
- Grant review and project management: Overseeing and managing philanthropic projects and grants.
SFOs in Singapore are equipped to handle these diverse functions, ensuring that the family’s wealth is not only preserved but also grown and transitioned seamlessly to future generations.
Why Choose to Set Up Family Offices in Singapore?
Singapore’s appeal as a destination for establishing family offices is rooted in several key factors that make it conducive for wealth management and growth. These include its stable economic environment, robust legal framework, and favourable tax policies.
Stable Economic Environment
- Singapore is renowned for its political stability, economic resilience, and consistent growth. This stability provides a secure environment for long-term investments.
- The country’s strategic location in South-East Asia makes it an ideal hub for managing regional investments.
Advanced Legal and Regulatory Framework
- Singapore’s legal system is well-regarded globally for its efficiency and transparency, offering strong protection for investors.
- The Monetary Authority of Singapore (MAS) and the Economic Development Board (EDB) provide robust regulatory oversight, ensuring compliance with international financial standards.
Attractive Tax Regime
- Singapore offers various tax incentives for family offices, making it financially advantageous to manage wealth in the country.
- The tax environment is not only favourable but also stable and predictable, allowing for effective long-term planning.
Accessibility to Financial Services
- The presence of numerous local and international banks, financial institutions, and investment opportunities makes Singapore a financial hub.
- Family offices have access to a wide array of financial products and services to diversify and manage their investments.
Quality of Life
- Singapore is known for its high standard of living, excellent healthcare, education, and world-class infrastructure.
- The multicultural society and English-speaking environment make it comfortable for expatriates and their families.
Business-Friendly Policies
- The government’s proactive approach to fostering a supportive environment for businesses is evident in its policies and initiatives.
- Setting up a family office in Singapore is relatively straightforward, with clear guidelines and efficient processes.
Tax Incentives for Family Offices in Singapore
Singapore’s government has implemented a range of tax incentives to attract High-Net-Worth Individuals (HNWIs) and their family offices. These incentives are designed to make Singapore a competitive and appealing destination for wealth management. Key tax incentives include the Enhanced-Tier Fund Tax Incentive Scheme (Section 13U) and the Onshore Fund Tax Incentive Scheme (Section 13O), along with the Global Investor Program Family Office Option (GIP – FO Principals profile).
Enhanced-Tier Fund Tax Incentive Scheme (Section 13U)
- This scheme offers tax exemption on specified income from funds managed by a fund manager in Singapore, irrespective of the company’s incorporation location.
- Requirements include a minimum of S$50 million in designated investments and employment of at least three investment professionals, one of whom must not be a family member.
Onshore Fund Tax Incentive Scheme (Section 13O)
- Similar to Section 13U, this scheme provides tax exemption but is targeted at companies incorporated and based in Singapore.
- The criteria include a minimum fund size of S$20 million and the employment of a minimum of two investment professionals.
Global Investor Program Family Office Option (GIP – FO Principals profile)
- This option is tailored for investors seeking Permanent Residency in Singapore through investment in a family office.
- It requires a minimum investment of S$2.5 million in a Singapore-based family office with an AUM of at least S$200 million.
Recent Updates to Tax Incentive Schemes
- As of 5 July 2023, new conditions apply to applications for both Section 13O and 13U, including changes in the tiered spending requirement and capital deployment requirements.
- These updates reflect Singapore’s commitment to evolving its tax incentive frameworks to remain competitive and responsive to global economic trends.
Singapore’s strategic approach in offering these incentives not only benefits the family offices but also contributes to the growth of its asset and wealth management industry.
The 13O Scheme
The Onshore Fund Tax Incentive Scheme, known as Section 13O, is structured to attract and retain family offices. This scheme offers tax exemptions to qualifying funds, encouraging the establishment of family offices in Singapore. The key features and requirements of the 13O scheme are as follows:
Eligibility Criteria
- The scheme is available to funds managed by a licensed fund manager in Singapore.
- A minimum fund size of S$20 million in designated investments is required at the time of application and must be maintained throughout the incentive period.
Investment Professional Requirements
- The family office must employ at least two investment professionals, with at least one not being a family member of the beneficial owners.
- These professionals should have relevant experience or qualifications and be Singapore tax residents, earning more than S$3,500 per month.
Spending Requirement
- A tiered spending requirement is in place, with a minimum of S$200,000 in local business spending.
- Additional spending requirements are scaled based on the Assets Under Management (AUM).
Capital Deployment Requirements
- The scheme mandates investing a lower of S$10 million or 10% of AUM in various designated investments.
- These investments include equities, REITs, business trusts, or ETFs listed on MAS-approved exchanges, qualifying debt securities, and investments in non-listed Singapore operating companies.
Private Banking Account Requirement
- The fund is required to have a private banking account with a MAS-licensed financial institution throughout the incentive period.
Recent Changes and Enhancements
- From 5 July 2023, new options and conditions were introduced, including recognition of eligible donations and grants to Blended Finance Structures as part of the spending requirement.
- The introduction of a multiplier effect on certain types of eligible investments for Capital Deployment Requirement computation.
The 13O scheme reflects Singapore’s proactive approach to adapting its tax incentive policies to the evolving global economic landscape and the specific needs of family offices. By offering significant tax advantages, the 130 scheme positions Singapore as an attractive destination for family offices seeking a supportive and efficient tax environment.
The 13U Scheme
The Enhanced-Tier Fund Tax Incentive Scheme, designated as Section 13U, is another pivotal element of Singapore’s initiative to attract family offices. This scheme extends tax exemptions to qualifying funds, further solidifying Singapore’s position as a leading destination for wealth management. Below are the main features and criteria of the 13U scheme:
Eligibility Criteria
- Applicable to funds managed by a Singapore-based licensed fund manager.
- A minimum of S$50 million in designated investments is required at the point of application and must be maintained throughout the incentive period.
Investment Professional Requirements
- The family office is required to employ a minimum of three investment professionals, with at least one being a non-family member.
- These professionals should possess relevant experience or academic qualifications and be Singapore tax residents.
Spending Requirement
- The 13U scheme imposes a tiered spending requirement, with a minimum of S$200,000 in local business spending.
- The overall spending requirement increases with the size of the fund’s AUM.
Capital Deployment Requirements
- The scheme demands investment in a range of designated investments, similar to those in the 13O scheme.
- These include investments in equities, REITs, business trusts, or ETFs on MAS-approved exchanges, and various other qualifying financial instruments.
Private Banking Account Requirement
- Like the 13O scheme, funds under the 13U scheme must maintain a private banking account with a MAS-licensed financial institution.
Recent Updates
- The 13U scheme has also been updated with new conditions effective from 5 July 2023, which include modifications to the spending and capital deployment requirements.
- These changes are part of Singapore’s continuous efforts to remain competitive and appealing to family offices globally.
The 13U scheme, with its focus on larger funds and additional requirements, complements the 13O scheme, offering a range of options for different types of family offices.
Global Investor Program Family Office Option (GIP – FO Principals Profile)
The Global Investor Program Family Office Option (GIP – FO Principals profile) is a distinctive initiative by Singapore to attract ultra-high-net-worth individuals (HNWIs) seeking permanent residency through investment in a family office. This program is tailored to integrate the benefits of wealth management with residency incentives. The main features and requirements of the GIP – FO Principals profile are as follows:
Investment Requirements
- Investors must commit a minimum of S$2.5 million in a Singapore-based family office having an Assets Under Management (AUM) of at least S$200 million.
- This investment demonstrates the investor’s commitment to the family office structure and Singapore’s financial ecosystem.
Personal Net Worth Criteria
- Applicants are required to have an individual or direct family net worth of a minimum of S$400 million, underscoring the program’s focus on HNWIs.
Professional Experience and Track Record
- A prerequisite for applicants includes a minimum of 5 years of experience as an entrepreneur, manager, or investor, showcasing a credible and successful track record in their respective fields.
Tax Incentive Integration
- Participants in the GIP – FO Principals profile are eligible for the tax incentives offered under the 13O and 13U schemes, subject to meeting their respective criteria.
- This integration provides a holistic approach to managing wealth in Singapore while offering the added benefit of permanent residency.
Long-Term Commitment to Singapore
- The program aims to attract individuals who are not only looking for efficient wealth management but also considering long-term residency and engagement with Singapore’s economy and society.
Recent Changes and Updates in Tax Incentive Schemes
Singapore has made significant updates to its tax incentive schemes, particularly the Enhanced-Tier Fund Tax Incentive Scheme (Section 13U) and the Onshore Fund Tax Incentive Scheme (Section 13O), to maintain its competitive edge as a leading destination for family offices. These changes, effective from 5 July 2023, reflect the nation’s responsiveness to global economic trends and the evolving needs of family offices. Key updates include:
Enhanced-Tier Fund Tax Incentive Scheme (Section 13U) Changes
- The minimum AUM requirement at the point of application and throughout the incentive period has been set to S$50 million.
- A requirement to employ a minimum of three investment professionals, of which at least one must not be a family member, has been introduced.
- These professionals must have relevant formal work experience or academic qualifications and be employed in roles like portfolio managers, research analysts, or traders.
- A tiered spending requirement has been implemented, with the minimum local business spending set at S$200,000.
Onshore Fund Tax Incentive Scheme (Section 13O) Changes
- For the 13O scheme, the minimum AUM requirement is S$20 million in designated investments.
- It necessitates the employment of at least two investment professionals, with at least one not being a family member of the beneficial owners.
- Similar to the 13U scheme, these professionals must be Singapore tax residents and earn more than S$3,500 per month.
Common Updates to Both Schemes
- Qualified investment professionals must engage more than 50% of their time in the qualifying activity and be Singapore tax residents throughout the incentive period.
- The Capital Deployment Requirements have been revised, with investment options including equities, REITs, business trusts, ETFs listed on MAS-approved exchanges, qualifying debt securities, and non-listed funds distributed by licensed financial institutions in Singapore.
- The fund must maintain a private banking account with a MAS-licensed financial institution.
- Recognition of eligible donations and grants to Blended Finance Structures as part of the spending requirement has been introduced.
Tiered Spending Requirement
- A tiered framework for spending requirements has been established, based on the AUM size, with thresholds set at S$200,000, S$500,000, and S$1 million.
Capital Deployment Requirements
- Investments in climate-related ventures and blended finance structures are now recognized as eligible investments.
- A multiplier effect for certain types of investments has been introduced for computing the Capital Deployment Requirement.
Conclusion
Singapore has firmly established itself as a premier destination for High-Net-Worth Individuals (HNWIs) looking to set up family offices, thanks to its stable economic environment, robust legal and regulatory framework, and attractive tax incentives. Speak to us to learn more about setting up your family office in Singapore.
