Section 13O and 13U for family offices
Singapore is an attractive base to set up family offices for many high-net-worth families due to country’s pro-business attitude and highly competitive tax system. Fund managers of single-family offices (SFO) can apply for tax exemptions through Section 13O and 13U.
Criteria for 13O and 13U:
| Section 13O (formerly 13R) | Section 13U (formerly 13X) | |
| Minimum assets under management (AUM) | SGD 10 million Increase its AUM to SGD 20 million within 2 years | SGD 50 million |
| Investment Professionals (IPs) | At least 2 IPs | At least 3 IPs with at least one IP who is a non-family member |
| Business spending (subject to the tiered business spending framework) | At least SGD 200,000 in total business spending | At least SGD 500,000 in local business spending |
| Local Investment | Invest at least 10% of its SUM or SGD 10 million, whichever is lower, in local investment at any one point in time |
Invest at least 10% of its SUM or SGD 10 million, whichever is lower, in local investment at any one point in time
|
Tiered business spending framework:
|
Section 13O (formerly 13R)
|
Section 13U (formerly 13X)
| |
| AUM range | Minimum total business spending (per financial year) |
Minimum total business spending (per financial year)
|
| Less than SGD 50 million | SGD 200,000 | SGD 500,000 |
| Between SGD 50 million to SGD 100 million | SGD 500,000 | SGD 500,000 |
| SGD 100 million or more | SGD 1,000,000 | SGD 1,000,000 |
Note that for the purpose of the local business spending requirements, expenses incurred should relate to the operating activities of the fund (as opposed to financing activities). Typical expenditure includes, but is not limited to, remuneration, management fees, tax advisory fees and operating costs.
It is worthwhile noting that the MAS has specified geographical requirements on the investments made by sections 13O and 13U funds. The new rules indicate that at least 10% of the fund’s AUM or S$10m (whichever is lower) must be invested in Singapore-based investments at any one point in time.
Such investments include:
· equities listed on Singapore-licensed exchanges
· qualifying debt securities
· funds distributed by Singapore-licensed/registered fund managers
private equity investments into non-listed Singapore-incorporated companies (e.g. start-ups)
Impacts
Higher professionalism in fund management
By setting a higher bar to entry than the existing regime, high-net-worth families looking to establish a family office in Singapore need to have a clearer plan or purpose and be ready to commit more capital when setting up their family office.
This means that family members must devote more time and money to design fund structures and strategies, obtaining tax benefits, and driving the investment process. New Ark has noticed that more families are considering trust structures. Therefore, the professionalism of family office fund management will increase.
Increase employment opportunities
The new condition of hiring at least 2 investment professionals for 13O and at least one non-family member for 13U will encourage family offices to hire more investment professionals.
Singapore has a highly educated and motivated workforce, but with the influx of capital, coupled with inflationary pressures and rising wages, it is harder to hire professional investors and managers. Recently, New Ark has discovered that many family offices are hiring high-quality investment professionals, and the salary packages offered are constantly increasing.
Family offices usually employ small teams investment professionals which further generate indirect employment in Singapore through their engagement of external finance, tax, and legal professionals for advice on wealth planning and operational matters.
Increase in migration
Families intending to set up family office in Singapore would prefer to manage the funds and receive financial advice directly. Therefore, relocating to Singapore long term is an attractive prospect. Family members holding employment passes can apply for permanent residence (PR).
Also, the Global Investor Programme (GIP) accords Singapore Permanent Resident status (PR) to eligible global investors who intend to drive their businesses and investment growth from Singapore.
Singapore has an excellent education system and world-class healthcare, allowing successful individuals and their families to enjoy a high quality of life in the country.
New Ark provides our client with a full range of consultation services for Single Family Office (SFO) and Global Investor Programme (GIP), from fund structure design to investment, and subsequent integration into the country. We provide a comprehensive range of consulting and follow-up services on registration of companies, accounting and taxation, and overseas relocation. Please feel free to WhatsApp us at +65 8830 8077 or WeChat at NewArkSg to speak to our professional team for more information.
Disclaimer
This article is written by New Ark Consulting and is for reference only. It may contain information that is proprietary to the Company and may not be published, distributed, reproduced, or redistributed, in whole or in part, without the prior consent of the Company. The article itself is not an offer or invitation to set up a family office, trade any investment product, establish a trust or establish a specific corporate structure or establish any legal relationship. Nor does it in itself constitute advice or a recommendation regarding wealth planning structures or corporate advice. It is for general information only and does not take into account specific investment objectives, investment experience, financial situation and the specific needs of any particular person. You should approach any potential investment or proposed wealth structure with caution. You should independently evaluate and consider the suitability of such products or structures, taking into account your specific objectives, investment experience, financial situation and/or specific needs (including your own wealth management needs and circumstances). Please obtain independent financial, legal and/or tax advice from professional advisors as required before proceeding with any investment, purchasing any investment product or building your wealth. Investments in financial instruments or other products carry significant risks, including the possibility of loss of the principal invested. Past performance does not guarantee or represent future results. Neither New Ark Consulting nor any of its officers shall be liable for any damages (whether direct, indirect or consequential) arising out of or in connection with the use of this article.
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