Family Office

Family offices are exclusive private wealth management advisory firms that serve ultra-high-net-worth individuals (HNWI). They offer a single total outsourced solution to managing the financial and investment side of an affluent individual or family by employing administrative and professional staff who exclusively assist the family members of that particular family office.  

 The two types of family offices are the Single Family Office (SFO) and Multi Family Office (MFO). Here at Xignam, we offer services for setting up Single Family Offices (SFOs). Typically, a single-family office conducts various activities to facilitate the day-to-day management of a family’s assets.   

The SFO typically offers services for:  

  • Investment Management 
  • General Advisory Service (estate planning, legal service, tax service, etc.) 
  • Family Professional Service (Philanthropy, Family governance/constitution planning etc.) 
  • Admin Service (Payroll, Accounts consolidation, Concierge service etc.) 

What are the important considerations in setting up a family office?

Singapore tax exemption for the family fund managed by the Family Office

As a general rule, only income sourced in or received in Singapore is subject to taxation.

Singapore resident individuals are taxed on Singapore-sourced income at progressive rates, reaching up to 24%, whereas companies face a flat tax rate of 17%.

Determining whether gains constitute income or capital involves analyzing various factors, including the frequency of similar transactions, length of the holding period, and the taxpayer’s motive.

In general, gains from the disposal of investments may be treated as Singapore-sourced income if such gains arise from trade or business activities in Singapore unless any exemption applies. The Section 13D, 13U and 13O tax incentive schemes provide a tax exemption on “specified income” (SI) derived from “designated investments” (DI) and aim to provide certainty on the tax treatment of such gains. 

Section 13O: Onshore Fund Tax Incentive Scheme

This incentive is also known as the Onshore Fund Tax Incentive Scheme. It was introduced to encourage the establishing and management of onshore funds in Singapore. 

Section 13O exempts the specified income (SI) derived by an “approved company” from funds managed by a Singapore-based fund manager concerning the designated investments (DI). The list of DI includes shares, stocks, debt securities, etc. Distributions by the fund derived from specified income (SI) will likewise be exempt for the fund’s investors.

Application to MAS: Required 

Minimum AUM required: $20 Million 

Additional Conditions: The fund must be Tax Resident in Singapore (control and Management exercised in Singapore) 

Local Business Spending: S$200,000 Annually 

Hiring: 2 Investment Professionals (1 must not be from UBO) 

Specific categories of investors who are not “qualifying” fund investors may also be subject to a financial penalty. Generally, “qualifying” investors are limited to individual investors and foreign tax resident entities not operating in Singapore or whose investment capital is not derived from Singapore operations. This, therefore, rules out most Singapore companies as “qualifying” investors and is intended to ensure that Singapore companies do not use the tax exemption as a means for tax avoidance. 

 

Section 13U: Enhanced Tier Tax Incentive Scheme

This incentive, also known as the Enhanced Tier Tax Incentive Scheme, applies to both onshore and offshore funds. It accommodates the broadest range of fund structures. 

Section 13U exempts SI derived by an “approved person” from funds managed by a Singapore-based fund manager concerning DI. Distributions by the fund derived from specified income (SI) will likewise be exempt for the fund’s investors.

Application to MAS: Required 

AUM require: S$50 Million 

Local Business Spending: S$200,000 Annually 

Hiring: 3 Investment Professionals 

Unlike Section 13O and 13D, Section 13U imposes no financial penalties on “qualifying” investors. Therefore, it generally allows for the broadest range of investors. 

Section 13D: Offshore Fund Tax Incentive Scheme

This incentive is also known as the Offshore Fund Tax Incentive Scheme. It is designed to attract foreign investors to use Singapore-based fund managers to manage their offshore fund vehicles. 

Section 13D exempts SI derived by a “prescribed person” from funds managed by a Singapore-based fund manager concerning DI. Distributions by the fund derived from specified income (SI) will likewise be exempt for the fund’s investors.

To qualify for this exemption, the fund must, amongst other conditions, not be resident in Singapore. Application to MAS is not Required 

Frequently Asked Questions

Enhanced-Tier Fund Exemption Scheme Requirements:
  • The fund must have a minimum fund size of S$50 million at the time of application;
  • The fund must be managed or advised by the relevant family office;
  • The family office must employ at least 3 residents (with at least one being a non-family member) investment professionals in Singapore who are substantively engaged in an investment management or advisory role;
  • The fund must incur at least S$500,000 in business spending in Singapore; and
  • Invest at least 10% of its AUM or S$10 million, whichever is lower, in local investment.
Resident Fund Exemption Scheme Requirements:
  • The fund must have a minimum fund size of S$10 million at the time of application (require S$20 million within 2 years grace period);
  • The family office must employ at least 2 resident investment professionals in Singapore who are substantively engaged in an investment management or advisory role; and
  • The fund must incur at least S$200,000in business spending in Singapore
  • Invest at least 10% of its AUM or S$10 million, whichever is lower, in local investment.
Documents Required
  • Shareholding Structure of family office
  • Photocopies of shareholders’ and directors’ identity documents/passports
  • Proof of address of shareholders and directors(for bank account opening)
  • Business Proposal
  • Proof for source of fund

Investors Who Don’t Meet The GIP Criteria

For applicants who do not meet the GIP criteria or have been rejected, we have alternative solutions for you. Please contact us today to learn more about GIP.

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