Singapore family office requirements – Key changes as of June 2024

Singapore Family Office Requirements : Singapore has seen a great inflow of offshore funds from families looking to set up a Singapore family office and this article looks at several key changes to the Singapore family office requirements in June 2024.

#1- Change in the minimum assets under management to be managed by the Single Family Office in respect of S13O and S13U of the Income Tax Act 1947 of Singapore

A single family office is an entity (the “Exempt Fund Manager”) which manages funds held by another Singapore entity (the “Fund”).  Usually when people talk about the tax incentives in relation to the Single Family Offices, they are talking about tax incentives for the Fund.

There are generally 2 tax incentive schemes that the Fund entity will apply for, namely under S13O of the income Tax Act 1947 of Singapore (“ITA”) or S13U of the ITA.

From 5 July 2023,

• applicants under S13O of the income Tax Act 1947 of Singapore need to have a minimum of S$20 million in designated investments at the point of application and throughout the incentive period.

• Applicants under S13U ITA need to have a minimum of S$50 million in designated investments at the point of application and throughout the incentive period.

#2- Change in spending requirement for Funds in relation to S13O and S13U

From 5 July 2023,

• applicants under S13O of the ITA have a tiered spending requirement, with a minimum of S$200,000 in local business spending;

• Applicants under S13U ITA have a tiered spending requirement, with a minimum of S$200,000 in local business spending.

#3- Capital Deployment Requirements for both S13O and S13U

Singapore Family Office Requirements

There are capital deployment requirements for both S13O and S123U whereby the SFO needs to invest the lower of S$10 million or 10% of assets under management in:

• Equities, REITS, Business Trusts, or ETFs listed on MAS-approved exchanges;
• Qualifying Debt Securities;
• Non-listed funds distributed by licensed financial institutions in Singapore;
• Investments into non-listed Singapore operating companies;
• Climate-related investments;
• Blended finance structures with substantial involvement of financial institutions in Singapore

1.5x or 2x amount invested in eligible investments recognised for Capital Deployment Requirement computation#

#4- Requirement for a Private Bank Account for SFO Applicants

The fund entity needs to have a private bank account with a MAS licensed financial institution at the point of application and throughout the incentive period.

#5- Increased AML / KYC Requirements

Following the 2 Billion Money Laundering scandal that we wrote extensively about previously, the Monetary Authority of Singapore (“MAS”) has strengthened its surveillance framework by mandating that all single family offices that wish to setup in Singapore carry out the following:

• be incorporated in Singapore;
• notify MAS and confirm that it is in compliance with the qualifying criteria under the class exemption when they commence operations in Singapore;
• report annually on total assets managed after the end of each calendar year; and
• maintain a business relationship with an MAS-regulated financial institution that will perform anti-money laundering checks on these SFOs.

On 11^th June 2024, the Edge Magazine reported that MAS also announced that it was demanding more information from new applicants under the family office regime.  According to annual forms that must be submitted to the MAS by family offices with tax exemptions, firms must now confirm that their beneficial owners, directors, representatives and shareholders have never committed, been convicted or even been charged with money laundering or terrorist financing offences. 

In parallel, ACRA has taken steps to strike off dormant companies from its register.  A spokesperson for ACRA noted that 17,000 inactive companies had been struck off the register in the five years ending 2023 and that efforts had been ramped up since then.

In conclusion, there are many additional conditions and changes to the S13 and S13U tax incentives under the SFO scheme.  The above is a brief summary of the conditions of the tax incentive.  For more details, please fill up the contact us form and a partner from a large law firm will be in touch with you.

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