MAS Amends Sections 13O and 13U Application Guidelines for Family Offices in Singapore
The Monetary Authority of Singapore (MAS) has amended its requirements for family offices[1] applying for tax incentive schemes pursuant to Sections 13O and 13U of the Income Tax Act 1947 (the Act). The following amended policies apply to all first preliminary submissions received by MAS on or after 18 April 2022 for these schemes, and MAS may require applications that have received no communication from MAS for a span of at least six months to be resubmitted under the amended guidelines. The following applications are not subject to the amended policies:
- Applications which have submitted preliminary information before 18 April 2022 and with correspondences with the MAS in the last six months;
- Applications that the MAS had received formal MASNET application before 18 April 2022, but approved after 18 April 2022; or
- Applications which were formally approved, with the issuance of a formal letter of offer from the MAS, before 18 April 2022.
Section 13O (formerly Section 13R) of the Act
The Singapore Resident Fund Scheme, or Section 13O of the Act, exempts from tax the income earned by a Singapore-incorporated or variable capital company arising from investments in funds managed throughout each basis period in any year of assessment by a family office in Singapore. In addition to the policies detailed below, to qualify for this scheme, the company’s issued securities must not all be beneficially owned by Singapore persons.
Amendments to Section 13O
| Requirement | Current Policy | Amended Policy (w.e.f. 18 April 2022) | ||||||||
| Minimum Assets Under Management (AUM) | No existing requirement, but in practice will need at least S$5 million for private banking purposes. | The fund must have a minimum AUM of S$10 million at the point of application, and the family office must commit to increasing its AUM to a minimum of S$20 million within a two-year grace period, if applicable. | ||||||||
| Mandatory Spending in Local Investments[2] | No existing requirement | The fund managed by the family office must invest at least 10% of its AUM or S$10 million, whichever is lower, in local investments at any one point in time. An additional one-year grace period will be granted if any of the above requirements are not met by the point of application. | ||||||||
| Minimum Number of Investment Professionals[3] | No existing requirement | The family office must have at least two investment professionals employed at the point of application, and will be given a one-year grace period to employ the second investment professional if it fails to do so by the point of application. | ||||||||
| Minimum Annual Business Spending[4] | The family office must incur a minimum annual business spending of S$200,000. | The family office must incur a minimum annual business spending in accordance with the following framework:
|
Section 13U (formerly Section 13X) of the Act
The Enhanced-Tier Fund Tax Exemption Scheme, or Section 13U of the Act, exempts from tax the income arising from funds managed by a Singapore-based fund manager/family office. In addition to the policies detailed below, to qualify for this scheme, the fund must have a minimum AUM of S$50 million at the point of application.
Amendments to Section 13U
| Requirement | Current Policy | Amended Policy (w.e.f. 18 April 2022) | ||||||||
| Mandatory Spending in Local Investments | No existing requirement | The fund managed by the family office must invest at least 10% of its AUM or S$10 million, whichever is lower, in local investments at any one point in time. An additional one-year grace period will be granted if any of the above requirements are not met by the point of application. | ||||||||
| Minimum Number of Investment Professionals | The family office must have at least three investment professionals employed at the point of application. | The family office must have at least three investment professionals employed at the point of application, with at least one investment professional being a nonfamily member, and will be given a one-year grace period to employ one nonfamily member as an investment professional if they are unable to do so by the point of application. | ||||||||
| Minimum Annual Business Spending | The family office must incur a minimum annual business spending in Singapore of S$200,000. | The family office must incur a minimum annual business spending in Singapore in accordance with the following framework:
|
[1] Family offices in this context are: (i) exempt fund management companies that manage assets for or on behalf of family(ies) and (ii) are wholly owned or controlled by members of the same family(ies). For the avoidance of doubt, these policies do not apply to fund managers who hold assets for or on behalf of third-parties who are not members of the family(ies) owning or controlling the fund vehicles. The term “family(ies)” may refer to lineal descendants of a single ancestor, in addition to their spouses, ex-spouses, adopted children and stepchildren.
[2] Local investments refer to: (i) private equity investments in nonlisted, Singapore-incorporated companies with operating business(es) in Singapore; (ii) equities listed on Singapore-licensed exchanges; (iii) funds distributed by Singapore-licensed or registered fund managers; and (iv) qualifying debt securities.
[3] Investment professionals refer to traders, research analysts and portfolio managers earning more than S$3,500 monthly who are substantively involved in their respective roles.
[4] All incurred expenses must relate to the fund’s operating activities (not financing activities), including but not limited to operating costs, remuneration and tax advisory/management fees. Minimum annual business spending may include investment management fees payable to the family office. “Annual” means each basis period relating to any year of assessment.
For More Information
If you have any questions about this Alert, please contact Leon Yee, Yu Lan, any of the attorneys in our Singapore office or the attorney in the firm with whom you regularly in contact.
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