Establishing a Family Office in Singapore: Structuring Considerations and Tax Incentive Schemes 🇸🇬
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Singapore Family Office Tax Incentives
Establishing a Family Office in Singapore: Structuring Considerations and Tax Incentive Schemes 🇸🇬
Singapore has cemented its position as a leading global wealth hub, largely driven by its political stability, robust legal framework, and competitive tax environment. For ultra-high-net-worth (UHNW) families, establishing a Family Office (FO) in Singapore is an increasingly attractive strategy for holistic wealth management, succession planning, and philanthropic endeavors.
Structuring Considerations for a Singapore Family Office
The fundamental decision when setting up a Family Office is choosing the appropriate structure, which typically revolves around the Single-Family Office (SFO) model in Singapore.
1. Single Family Office (SFO) vs. Multi-Family Office (MFO)
Single-Family Office (SFO): This is a private company established to manage the wealth and affairs of one single family. This structure offers maximum privacy and control, with services tailored exclusively to the family's needs.3 SFOs are generally exempt from licensing by the Monetary Authority of Singapore (MAS) if they manage only the assets of the same family.
Multi-Family Office (MFO): An MFO serves two or more unrelated families. This model allows for the sharing of expertise and resources, offering cost efficiencies. However, MFOs typically require a Capital Markets Services (CMS) license from MAS.
2. Choosing the Legal Entity
The SFO structure typically involves a two-entity framework: a Fund Management Company (FMC), which serves as the SFO, and a Fund Vehicle (FV), which holds the investments.
Private Limited Company (Pte. Ltd.): This is the most common entity for the FMC and the FV. It provides limited liability and is straightforward to incorporate with the Accounting and Corporate Regulatory Authority (ACRA).
Variable Capital Company (VCC): The VCC is a relatively new, flexible corporate structure specifically designed for investment funds. It's often the preferred vehicle for the Fund Vehicle (FV) due to its ability to redeem shares and pay dividends out of capital, offering greater flexibility.
Trusts: Trusts can be layered into the structure, often above the SFO or fund vehicle, to facilitate complex succession planning and asset preservation across generations, leveraging Singapore's strong trust laws.
Key Tax Incentive Schemes: Sections 13O and 13U
Singapore offers powerful tax incentives for funds managed by Singapore-based FOs, providing tax exemption on specified investment income derived from designated investments. The two primary schemes under the Income Tax Act 1947 are Section 13O and Section 13U.
Comparison of Tax Incentive Schemes
Feature | Section 13O (Onshore Fund) | Section 13U (Enhanced-Tier Fund) |
Fund Vehicle Type | Singapore-incorporated company or VCC. | Domestic or offshore entity (VCC is common). |
Minimum AUM | S$20 million in Designated Investments at application & throughout the incentive period. | S$50 million in Designated Investments at application & throughout the incentive period. |
Investment Professionals (IPs) | Minimum 2 IPs, with at least 1 being a non-family member, employed as a Singapore tax resident. | Minimum 3 IPs, with at least 1 being a non-family member, employed as a Singapore tax resident. |
Minimum Local Business Spending (LBS) | Tiered requirement, starting from S$200,000 annually in Singapore. | Tiered requirement, starting from S$200,000 annually in Singapore. |
Capital Deployment Requirement (CDR) | Must invest the lower of 10% of AUM or S$10 million in specific local/qualifying investments (e.g., Singapore-listed equities, non-listed Singapore operating companies). | Must invest the lower of 10% of AUM or S$10 million in specific local/qualifying investments. |
Benefits | Tax exemption on specified income from designated investments. | Tax exemption on specified income from designated investments. |
Key Requirements Common to Both Schemes
Private Banking Account: The Fund Vehicle must maintain a private banking account with a MAS-licensed financial institution in Singapore.
Screening Report: New applications for both schemes must be accompanied by a screening report issued by a selected Screening Service Provider.
Local Economic Substance: Both schemes are designed to ensure the FO contributes to the local economy through job creation (IP requirements) and local spending (LBS).
Regulatory and Compliance Environment
While SFOs managing family assets are typically granted a licensing exemption, they are still subject to significant regulatory oversight from MAS, particularly in the areas of Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT).
MAS Notification: An SFO must notify MAS and confirm compliance with qualifying criteria when commencing operations.
Annual Reporting: SFOs must report annually on total assets managed and confirm compliance with AML/CFT checks.
Ongoing Due Diligence: The SFO is expected to maintain robust internal controls and due diligence processes. Recent regulatory enhancements also mandate confirming that beneficial owners, directors, and key personnel have not been charged or convicted of money laundering offences.
Beyond Tax: Other Strategic Advantages
Singapore's appeal extends beyond the tax incentives, offering a holistic environment for UHNW families:
Immigration Pathways: The Global Investor Programme (GIP) – Family Office Option offers a pathway to Permanent Residency (PR) for the family principal, requiring a minimum S$2.5 million investment in a Singapore-based FO with at least S$200 million in Assets Under Management (AUM).
Philanthropy Incentives: Singapore actively promotes charitable giving. The Philanthropy Tax Incentive Scheme (PTIS) offers a 100% tax deduction on donations to local Institutions of a Public Character (IPCs), capped at S$50 million.
World-Class Ecosystem: The city-state provides access to a deep pool of professional service providers, including experienced private bankers, lawyers, tax specialists, and fund administrators, critical for sophisticated wealth management.
Establishing a Family Office in Singapore requires careful planning to align the legal structure with the family's long-term objectives and to ensure compliance with the ongoing economic substance and regulatory requirements to fully benefit from the lucrative tax incentive schemes.
The Capital Deployment Requirement (CDR) is a crucial component of the updated eligibility criteria for both the Section 13O and 13U tax incentive schemes.
The CDR is designed to ensure that Single Family Offices (SFOs) contribute meaningfully to Singapore's broader economy and investment ecosystem.
Here is a detailed breakdown of the CDR for both schemes:
Capital Deployment Requirement (CDR) Overview
The CDR is identical for both the Section 13O (Onshore Fund) and Section 13U (Enhanced-Tier Fund) schemes.
Requirement | Details |
Minimum Investment | The Fund Vehicle must invest the lower of the following amounts in qualifying assets: (i) S$10 million OR (ii) 10% of the Fund's Assets Under Management (AUM). |
Timing | The fund must meet the CDR by the end of the first full-year Annual Declaration and in each subsequent financial year. |
Qualifying Investments for CDR (The 6 Options)
The funds deployed must be invested in one or more of the following six categories of assets:
Listed Equities/Trusts: Equities, Real Estate Investment Trusts (REITs), Business Trusts, or Exchange Traded Funds (ETFs) listed on MAS-approved exchanges (e.g., Singapore Exchange - SGX).
Qualifying Debt Securities (QDS): Debt securities that meet the specified QDS criteria.
Non-listed Funds: Non-listed funds that are distributed by a licensed/registered financial institution in Singapore.
Singapore Operating Companies: Investments into non-listed Singapore-incorporated companies that have an operating business and a substantive presence in Singapore.
Climate-related Investments: Investments that meet the criteria for climate-related projects.
Blended Finance Structures: Investments, particularly in the form of concessional capital, in blended finance structures that involve substantial participation from financial institutions in Singapore.
Multipliers for CDR (Enhanced Recognition)
A key feature of the CDR is the introduction of multipliers, which enhance the recognition amount for investments that are considered to offer greater strategic value to the Singapore economy, particularly those in local public markets, climate finance, and blended finance.
The amount invested in the following categories will be scaled up when computing if the CDR is met:
Multiplier | Investment Category | Details |
2X | Singapore-Listed Equities & Blended Finance (Deeply Concessional Capital) | Investments will be recognised at twice their actual value (e.g., S$1M invested counts as S$2M). |
1.5X | Blended Finance (Concessional Capital) | Investments will be recognised at 1.5 times their actual value. |
Example of Multiplier Effect
If a fund with an AUM of S$100 million has a CDR requirement of S$10 million (the lower of S$10M or 10% of S$100M):
If the fund invests S$5 million in a regular non-listed fund (1X multiplier), the recognized CDR is S$5 million.
If the fund instead invests S$5 million in SGX-listed equities (2X multiplier), the recognized CDR is S$10 million ($5M * 2 = $10M), thus fully satisfying the requirement with a lower actual cash outlay.
This incentivizes SFOs to direct a significant portion of their local deployment into Singapore's public markets or impactful finance structures.
The CDR is a critical requirement that necessitates careful planning and structuring to ensure the SFO benefits from the tax exemption while meeting its regulatory obligations.
Local Business Spending (LBS) Requirement
The Local Business Spending (LBS) requirement is one of the key economic substance tests that the Single Family Office (SFO) Fund Vehicle must meet annually to qualify for and retain the tax exemption under Section 13O and Section 13U.
It mandates that the fund must incur a specified minimum amount of operating expenditure in Singapore each year.
Tiered LBS Requirement (Effective from 2027 YA)
The LBS requirement is now tiered based on the Fund Vehicle's Assets Under Management (AUM) in Designated Investments (DI) at the end of its financial year. The same tiered structure applies to both Section 13O and Section 13U funds.
AUM in Designated Investments (DI) | Minimum Annual Local Business Spending (LBS) |
AUM < S$250 million | ≥ S$200,000 |
S$250 million $\le$ AUM < S$2 billion | ≥ S$300,000 |
AUM ≥ S$2 billion | ≥ S$500,000 |
Note on Timeline: For funds awarded the incentive before January 1, 2025, there is a transitional period. They are generally required to start meeting these new tiered LBS and AUM-in-DI requirements from the financial year ending in 2027 (Year of Assessment 2028). New applications are subject to these rules immediately or upon the end of their grace periods.
What Qualifies as Local Business Spending?
LBS refers to operating expenses incurred by the Fund Vehicle (or the SFO Fund Manager on behalf of the Fund) that are paid to Singapore-based contracting parties (i.e., local entities or Singapore tax residents).
This expenditure must be paid for services rendered or goods supplied in the conduct of the fund management business.
Typical examples of qualifying LBS include:
Remuneration/Salaries: Salaries, bonuses, and Central Provident Fund (CPF) contributions for Singapore-based employees, particularly the Investment Professionals (IPs). This is usually the largest component.
Management Fees: Fees paid to the Singapore-based Fund Management Company (the SFO itself). This fee must be at arm's length.
Professional Fees: Fees paid to Singapore-based firms for:
Legal and Compliance Services
Tax Advisory Services
Audit Fees
Fund Administration and Accounting Services
Other Operating Costs: Rent for a Singapore office, IT and telecommunication expenses, and other administrative overheads paid to local suppliers.
Financing Expenditure: Excluded—costs like interest paid on borrowings are not counted towards LBS.
Leveraging Donations and Grants (The Multiplier Effect)
For funds with AUM of S$50 million and above, the Monetary Authority of Singapore (MAS) allows for certain philanthropic expenditures to count towards meeting the total required spending (the ≥ S300,000 or ≥ S500,000 tiers) above the S$200,000 minimum.
Eligible Donations: Donations to Singapore Registered Charities, Exempt Charities, or Institutions of a Public Character (IPCs) are recognized as eligible spending.
Blended Finance Grants: Grants (contributions with no return of principal and income) made to blended finance structures with substantial involvement of financial institutions in Singapore are recognized with a 2X multiplier.
This means that contributions in these areas can help an SFO satisfy the higher-tier LBS requirements more efficiently, encouraging a greater overall contribution to Singapore's financial ecosystem and social good.
Meeting the LBS and Investment Professional requirements together demonstrates that the Family Office has sufficient economic substance in Singapore, which is the primary policy goal of the incentive schemes.
Investment Professional (IP) Requirements Summary
The Investment Professional (IP) requirement ensures that the Single Family Office (SFO) is not merely a mailbox or a paper company but a substantive fund manager with specialized expertise physically located in Singapore.
The requirements differ slightly between the two schemes and must be met at the point of application and throughout the incentive period.
Feature | Section 13O (Onshore Fund) | Section 13U (Enhanced-Tier Fund) |
Minimum IPs | Minimum 2 Investment Professionals (IPs) | Minimum 3 Investment Professionals (IPs) |
Non-Family Requirement | At least 1 IP must not be a family member of the beneficial owners. | At least 1 IP must not be a family member of the beneficial owners. |
Residency | Must be a Singapore Tax Resident throughout the incentive period. | Must be a Singapore Tax Resident throughout the incentive period. |
Detailed Criteria for a Qualifying IP (Common to both 13O and 13U)
For an individual to count towards the minimum IP headcount, they must satisfy strict criteria related to their role, remuneration, and qualifications:
1. Qualifying Role and Primary Activity
The IP must be employed primarily in the conduct of investment management in the SFO.
Qualifying Titles: The role must primarily be that of a Portfolio Manager, Research Analyst, or Trader.
Time Commitment: The IP must engage more than 50% of their time in the qualifying investment management activities.
Excluded Roles: Roles primarily relating to operations, administration, financial planning, budgeting, or finance/accounting are not considered qualifying IP roles.
2. Minimum Remuneration
The IP must earn a gross monthly salary of more than S$3,500 for the work done in Singapore.
Note: Salaries paid to IPs are a key component of the Local Business Spending (LBS) requirement.
3. Academic Qualifications and Work Experience
The IP is expected to possess the requisite background to effectively perform the investment management function. This includes having:
Relevant Formal Work Experience: Experience in the conduct of investment management in a formal employment capacity, OR experience in deal structuring (if the fund focuses on Private Equity/Venture Capital/Direct Investments).
Relevant Academic Qualifications: A Masters/Degree/Diploma in areas like Accountancy, Finance, Economics, Business Administration/Management, Financial Engineering, OR a relevant professional certification (e.g., CFA or CMFAS certification).
4. Non-Family Member Definition
The "non-family member" requirement is crucial for establishing genuine professional substance.
Family: The Monetary Authority of Singapore (MAS) broadly defines "family" to include individuals who are lineal descendants from a single ancestor, including their spouses, ex-spouses, adopted children, and stepchildren.
Requirement: The required non-family IP must be an unrelated professional hired on an arms-length basis to manage the family's assets.
In summary, the IP requirements are designed to ensure that the SFO is run by a capable, professional, and locally based team, demonstrating true economic substance in Singapore, which is the foundational principle for granting the tax incentives.
How Bestar Singapore Can Help Establish Your Family Office (FO) and Maximise Tax Incentives
Establishing a Family Office in Singapore: Structuring Considerations and Tax Incentive Schemes 🇸🇬
Establishing a Single Family Office (SFO) in Singapore is a complex, multi-faceted process that requires specialist expertise across legal structuring, regulatory compliance, tax strategy, and ongoing administration. Bestar Singapore is a professional service provider that offers comprehensive, integrated support to help High-Net-Worth (HNW) families navigate this entire journey.
Our services directly address the stringent requirements of the Monetary Authority of Singapore (MAS) and the Inland Revenue Authority of Singapore (IRAS), particularly those linked to the Section 13O and Section 13U tax incentive schemes.
1. Expert SFO Structuring and Setup Advisory
The foundational step for any Family Office is selecting the optimal legal structure. Bestar provides tailored advisory to ensure the structure meets the family's specific needs for wealth preservation, succession planning, and tax efficiency.
Optimal Structure Determination: Advising on the best two-entity structure—a Fund Management Company (FMC) (the SFO) and a Fund Vehicle (FV) (e.g., a Private Limited Company or a Variable Capital Company, VCC) or integrating a Trust for inter-generational planning.
Company Incorporation and Secretarial Services: Handling the full process of incorporating the SFO and the Fund Vehicle with ACRA. Their corporate secretarial team ensures ongoing compliance with Singapore's corporate governance requirements.
Regulatory Status and Exemption: Confirming the SFO's eligibility for the licensing exemption under MAS (since it manages only the assets of one family), and assisting with any necessary regulatory notifications or filings.
2. Maximising Tax Incentives (Section 13O & 13U)
The core value Bestar offers is guiding the SFO through the application and ongoing compliance for the lucrative Section 13O and 13U tax exemption schemes.
Tax Consulting and Application Support
MAS Application Management: Preparing and submitting the complex application package to MAS for the 13O or 13U incentive. This includes ensuring all quantitative and qualitative criteria are demonstrably met before submission.
Meeting Economic Substance Requirements: Advising on strategies to satisfy the key economic substance criteria:
Assets Under Management (AUM): Structuring and documenting the S$20 million (13O) or S$50 million (13U) minimum AUM in Designated Investments (DI).
Investment Professionals (IPs): Advising on the recruitment and employment structure for the minimum 2 IPs (13O) or 3 IPs (13U), including the crucial non-family member requirement and ensuring they meet the Singapore Tax Resident status and minimum salary thresholds.
Local Business Spending (LBS): Calculating, tracking, and ensuring the fund vehicle meets the annual minimum Local Business Spending (starting from S$200,000, tiered based on AUM). IP salaries and management fees paid to the SFO (their client) are the main components they help manage.
Capital Deployment Requirement (CDR): Advising on strategies to meet the S$10 million or 10% of AUM investment into qualifying Singapore assets, leveraging the 2X multipliers for SGX-listed equities to meet the requirement more efficiently.
Ongoing Tax Compliance
Corporate Tax and GST Advisory: Providing comprehensive tax services for both the SFO (FMC) and the Fund Vehicle (FV), including corporate tax filing, personal tax for the principals, and managing GST compliance, including the GST remission scheme available to incentivised funds.
Transfer Pricing: Offering clarity and guidance on transfer pricing for related-party transactions (e.g., the management fee paid by the fund to the SFO), aligning with IRAS requirements.
3. Outsourced (Virtual) Family Office Services
To help the family remain focused on investment strategy, Bestar offers "Virtual Family Office" services, allowing them to outsource critical administrative and compliance functions, which directly helps meet the Local Business Spending (LBS) requirement.
Accounting and Bookkeeping: Maintaining the financial records for the SFO and the Fund Vehicle, ensuring timely and compliant financial statement preparation.
Payroll Outsourcing: Managing monthly payroll, CPF contributions, and year-end reporting for the locally employed Investment Professionals (IPs).
Audits and Assurance: Conducting the necessary financial audits for the Fund Management Company (FMC), particularly if it holds a Capital Markets Services (CMS) license (for MFOs) or for the Fund Vehicle, ensuring compliance with MAS and ACRA regulations.
4. Visas and Immigration Support
For UHNW principals and their key family members looking to relocate, Bestar offers support for the necessary immigration pathways.
Employment Pass (EP) Application: Assisting in applying for EPs for the principals, Investment Professionals, and key management staff required to physically manage the FO in Singapore.
Global Investor Programme (GIP) Advisory: Providing guidance on the GIP – Family Office Option, which grants a pathway to Permanent Residency (PR) to the family principal who invests a minimum of S$2.5 million into a qualifying SFO that manages at least S$200 million in AUM.
In essence, Bestar acts as an integrated partner, combining tax, legal, accounting, and compliance expertise under one roof to ensure the SFO is established efficiently, fully complies with all local regulations, and successfully secures and maintains its tax incentives.
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