Navigating Singapore's Fund Tax Incentives: A Deep Dive into Section 13O and 13U

Navigating Singapore's Fund Tax Incentives: A Deep Dive into Section 13O and 13U | Bestar

Singapore Fund Tax Incentives: 13O & 13U

Navigating Singapore's Fund Tax Incentives: A Deep Dive into Section 13O and 13U

Unlock significant tax savings and boost your fund's profitability with a strategic understanding of the Income Tax Act (ITA) Sections 13O and 13U. Singapore has cemented its position as a leading global financial hub, actively encouraging fund management activities through these attractive tax incentive schemes.

This section provides an overview of the crucial Singapore fund tax incentives—Section 13O (Onshore Fund Tax Incentive) and Section 13U (Enhanced-Tier Fund Tax Incentive)—administered by the Monetary Authority of Singapore (MAS).

What are Sections 13O and 13U?

Sections 13O and 13U of the Singapore Income Tax Act 1947 are essential tax exemption schemes for funds managed by Singapore-based fund managers, including Single Family Offices (SFOs).

The core benefit of these schemes is the exemption from Singapore income tax on "specified income" derived from "designated investments" (DI). This broad exemption covers a wide range of investment gains, providing a high degree of tax certainty for international and domestic investors.

• Section 13O: Designed for Onshore Funds, typically Singapore-incorporated companies (or Limited Partnerships under the new 13OA scheme). It is generally suitable for smaller or entry-level fund structures.

  
  

• Section 13U: Known as the Enhanced-Tier Fund Tax Incentive, it is tailored for larger, more substantial fund structures, including master-feeder arrangements, and applies to both onshore and offshore funds.

Key Requirements: S13O vs. S13U (Summary)

While both sections offer tax exemptions, they have different thresholds and economic substance requirements designed to scale with the fund's size and complexity. The following table highlights the key differences and requirements, particularly for Single Family Offices (SFOs), which are often the main applicants.

Criteria	Section 13O (Onshore Fund Tax Incentive)	Section 13U (Enhanced-Tier Fund Tax Incentive)
Fund Structure	Singapore-incorporated company (or LP via S13OA). Must be a Singapore tax resident.	Flexible (company, trust, limited partnership). Can be onshore or offshore.
Minimum AUM (Designated Investments)	S$20 Million at the point of application and throughout the incentive period.	S$50 Million at the point of application and throughout the incentive period.
Investment Professionals (IPs)	Minimum 2 IPs (at least 1 non-family member) who are Singapore tax residents.	Minimum 3 IPs (at least 1 non-family member) who are Singapore tax residents.
IP Qualifications	Relevant formal work experience or academic qualifications. Must earn $3,500+ monthly and spend 50%+ time on qualifying activity.	Same as Section 13O.
Local Business Spending (LBS)	Tiered requirement, with a minimum of S$200,000 annually.	Tiered requirement, with a minimum of S$200,000 annually, but higher total tiers based on AUM.
Private Banking Account	Must have a private banking account with an MAS-licensed Financial Institution.	Same as Section 13O.

Note: The AUM and IP requirements for non-SFO funds may differ, especially with revisions effective from January 1, 2025, which introduced a minimum $5M AUM for Section 13O funds and $50M for Section 13U funds at the end of each Financial Year.

Economic Substance: Beyond the Tax Break

Singapore's government continually refines these schemes to ensure that funds receiving the tax exemption contribute meaningfully to the local economy. The stringent requirements for Assets Under Management (AUM), the employment of Investment Professionals (IPs) who are Singapore tax residents, and the minimum Local Business Spending (LBS) are all designed to establish genuine economic substance in Singapore.

• Local Business Spending (LBS): This includes costs like management fees, legal fees, tax advisory fees, and other business expenditure incurred in Singapore. Meeting this requirement is crucial for renewal.

  
  

• Capital Deployment: Both schemes may also include requirements related to capital deployment into local investments, often with multipliers given for eligible Singapore-listed equities or blended finance structures.

The Future: Updates and Extension

The fund tax incentive schemes, including Sections 13O and 13U, have been extended to December 31, 2029. Alongside this extension, the government has introduced amendments, such as the introduction of Section 13OA for Limited Partnerships, updated AUM calculation methods (based on Designated Investments rather than Net Asset Value), and revised LBS tiers.

These ongoing refinements demonstrate Singapore's commitment to adapting its regulatory framework to remain competitive and attractive for global fund managers and Single Family Offices.

Documentation Required for MAS Section 13O and 13U Application

Applying for the Section 13O or 13U fund tax incentive is a comprehensive process managed by the Monetary Authority of Singapore (MAS). The required documentation generally centers on demonstrating that the fund and its Singapore-based fund manager (e.g., a Single Family Office or Licensed Fund Management Company) meet the necessary economic substance and governance criteria.

While MAS does not publish a single, rigid checklist for public consumption, a typical application package requires the following core documents and information:

1. Fund and Management Entity Setup Documents

These documents establish the legal existence and operational structure of the fund and the Singapore-based manager.

Document Type	Description & Purpose
MAS Application Form	The official submission form (often via an online portal like the MAS Tax Scheme portal) for the respective incentive (13O or 13U).
Constitutional Documents	Certificate of Incorporation/Registration, Constitution/Memorandum & Articles of Association (for companies), Trust Deed (for Trusts), or Limited Partnership Agreement (for LPs/13OA).
Offering Document/PPM	Private Placement Memorandum (PPM) or equivalent document outlining the fund's objectives, investment strategy, risk factors, and target investors.
Corporate Structure Chart	Detailed diagram showing the fund vehicle, the Singapore-based fund manager, and the ultimate beneficial owner(s).
MAS Screening Report	(Crucial from Oct 1, 2024, for SFOs) A report issued by a recognized Screening Service Provider validating that the fund structure and beneficial owners meet MAS requirements.
Banking Confirmation	Confirmation letter from an MAS-licensed financial institution (a Private Bank) stating that the Fund/SFO has an account.

2. Investment Professional (IP) Documentation

This confirms that the fund manager meets the minimum headcount and quality requirements for Investment Professionals (IPs) who are Singapore tax residents.

Document Type	Description & Purpose
Employment Contracts/Letters	Contracts for the required number of IPs (Min. 2 for 13O, Min. 3 for 13U) employed by the Singapore-based fund manager.
IP Profiles/CVs	Detailed Curriculum Vitae (CV) for each IP, highlighting relevant formal work experience and/or academic qualifications in finance, economics, or accountancy.
Salary/CPF Records	Evidence that the IPs' monthly salary meets the minimum threshold (e.g., > S$3,500) and that they are Singapore tax residents.
Job Description	Must clearly define the IP role (Portfolio Manager, Research Analyst, or Trader) and confirm they spend more than 50% of their time on qualifying investment activities.
Non-Family Member Confirmation	Declaration confirming that at least one of the IPs is not a family member of the beneficial owners.

3. Financial and AUM Documentation

This section proves the fund meets the minimum size requirement and has the ability to fulfill the annual economic spending criteria.

Document Type	Description & Purpose
Assets Under Management (AUM) Statement	A certified statement (usually by the fund administrator or the Private Bank) confirming the fund's AUM in Designated Investments (DI) meets the minimum threshold: S$20M for 13O or S$50M for 13U at the point of application.
Investment Portfolio List	A list detailing the types of Designated Investments the fund currently holds.
Projected Local Business Spending (LBS)	A detailed breakdown and projection of how the fund intends to meet the minimum annual LBS (e.g., S$200,000 for AUM below S$50M) through management fees, legal, audit, and tax advisory services paid to Singapore entities.
Capital Deployment Requirement (CDR) Plan	For funds subject to the CDR (typically SFO funds), a plan showing how they will invest the required amount (lower of S$10M or 10% of AUM) in eligible local investments.

Important Application Considerations

• No Grace Period (Post-July 2023): For new SFO applications, you must meet the minimum AUM and IP requirements at the point of application.

  
  

• Submission Channel: All new applications are now typically submitted through the official MAS Tax Scheme portal.

  
  

• Adviser Role: Due to the complexity and frequent updates to the guidelines, engaging a professional tax advisor or fund specialist is highly recommended to compile and submit the documentation accurately.

Partnering with Bestar Singapore: Your Guide to Mastering Section 13O & 13U Tax Incentives

Navigating Singapore's Fund Tax Incentives: A Deep Dive into Section 13O and 13U

Navigating the complexities of the Monetary Authority of Singapore (MAS) fund tax incentive schemes (Sections 13O and 13U) is critical for wealth structuring, especially for Single Family Offices (SFOs). Bestar Singapore offers specialized, end-to-end expertise to ensure your fund structure is compliant, optimized for tax efficiency, and meets all stringent economic substance requirements.

Here is how Bestar Singapore can help you successfully acquire and maintain the Section 13O and 13U tax incentives.

1. Optimal Fund Structuring and Setup

Bestar begins with a strategic assessment to determine the most suitable structure for your family's or fund's needs, whether it's the Section 13O Onshore Fund or the Section 13U Enhanced-Tier Fund.

• Tailored Structuring: Advising on the optimal legal vehicle (e.g., Private Limited Company, Limited Partnership (13OA), or Variable Capital Company (VCC)) to align with your investment goals, tax residency, and succession planning needs.

  
  

• MAS Pre-Assessment: Conducting a thorough check against the latest MAS criteria (e.g., minimum S$20M AUM for 13O and S$50M AUM for 13U for SFOs) to ensure the structure is viable before application.

  
  

• SFO Establishment: Providing end-to-end Single Family Office (SFO) setup services, ensuring the managing entity is correctly established in Singapore to meet the "managed by a Singapore-based fund manager" requirement.

  
  

2. Ensuring Full MAS Compliance and Documentation

The success of a Section 13O/13U application hinges on precise documentation and adherence to economic substance rules. Bestar manages this critical phase:

• Application Preparation: Compiling all necessary documents, including the constitutional documents, investment mandate, and formal application forms for submission via the MAS Tax Scheme Portal.

  
  

• Economic Substance Management: Providing solutions to meet the key requirements:

  
  

  • Investment Professionals (IPs): Advising on the required headcount (2 IPs for 13O, 3 IPs for 13U), helping draft compliant job descriptions, and ensuring the IPs meet the Singapore tax residency and salary ($3,500+) thresholds.

  • Local Business Spending (LBS): Creating a projection plan to meet the tiered LBS requirement (minimum S$200,000 annually) through locally paid services, including Bestar’s own accounting, tax, and corporate secretarial fees.

    
    

• Post-October 2024 Screening: Assisting with the mandatory Screening Report process required for new SFO applications to confirm compliance of the beneficial owners and structure.

3. Comprehensive Ongoing Compliance and Administration

The tax exemption requires continuous compliance, which Bestar supports through its integrated Virtual Family Office (VFO) services:

• Corporate Secretarial: Managing all statutory filings with ACRA (Accounting and Corporate Regulatory Authority) to ensure the fund remains in good standing.

  
  

• Accounting & Bookkeeping: Providing meticulous accounting services tailored for fund entities, ensuring accurate tracking of Designated Investments (DI) and Local Business Spending (LBS) throughout the year.

  
  

• Tax Advisory & Filing: Handling the annual corporate tax filing and ensuring the fund successfully claims the tax exemption on its Specified Income from Designated Investments, while mitigating tax risks associated with non-qualifying income or investors.

  
  

• Annual Renewal Support: Proactively assisting with the annual declaration to the Inland Revenue Authority of Singapore (IRAS) and MAS to prove that the fund continues to meet the AUM, IP, and LBS criteria for the incentive’s continued validity.

By integrating legal structuring, regulatory compliance, and day-to-day administrative support, Bestar Singapore acts as your single point of contact to establish and secure your long-term wealth management presence in Singapore under the lucrative 13O and 13U schemes.