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.
There are two types of family offices, namely 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 planing, 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?
- the structure of the family office vehicle;
- the utilization of tax incentives for certain investments;
- the tax exposure and implications in other relevant jurisdictions (e.g., the family’s home jurisdiction, jurisdictions where assets are located, jurisdictions where family members/trust beneficiaries are located);
- the nature of the underlying assets and investments held by each entity (e.g., whether there are any real estate, substantial listed stakes, operating businesses, etc.) and the family’s investment objective and strategy in respect of each investment;
- the current residence status of the relevant family members (and any anticipated changes in their status);
- whether any employment pass, permanent residence or citizenship status is required or desired to be obtained for any family member or employee of the family office;
- the family’s governance and succession plans;
- the family’s religion and whether there are any forced heirship concerns; and
- the family’s philanthropic philosophy and intentions.
Singapore tax exemption for the family fund managed by the Family Office
As a general rule, only income that is sourced in or received in Singapore is subject to tax. Singapore resident individuals are subject to tax on Singapore-sourced income at progressive rates of up to 24%, while companies are subject to tax at a flat rate of 17%.
Singapore does not impose a tax on capital gains. Whether gains are income or capital is a question that requires an analysis of a range of factors, such as the frequency of similar transactions, length of holding period and the motive of the taxpayer.
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 out of SI will be similarly exempt in the hands of 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 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 out of SI will be similarly exempt in the hands of 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
- 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 resident(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.
- 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.
- 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.