Singapore Family Office: Tax Benefits, Single VS Multi SFOs

6 min read|Last Updated: December 6, 2023|

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Family offices are firms that provide a range of services, including asset management, tailored to the needs of affluent families. Singapore has become a prominent location for family offices, with various tax exemption schemes, such as 13CA, 13R, and 13X, designed to attract them. Single Family Offices (SFOs) manage assets for a single family and have specific regulatory considerations, while Multi-Family Offices (MFOs) manage assets for multiple families and require regulatory oversight. An alternative to family offices is establishing a company in Singapore, which has its own set of considerations for local and international entrepreneurs.

What are Family Offices?

A family office operates as other firms do, as they offer a range of services tailored to the needs of affluent families which includes asset management. In Singapore, the Monetary Authority of Singapore (MAS) defines a single-family office (SFO) as an entity responsible to oversee assets exclusively for one family, with full ownership or control within the family members. Beyond (SFOs), there are also other entity types such as multi-family offices that can manage the wealth of multiple families. 

So why should we choose a Family Office?

Opting for a family office to manage your assets provides a secure method for handling your wealth to benefit your family now and for future generations. Additionally, some countries provide tax incentives that can significantly boost the cost-effectiveness of using a family office to save on taxes.

To illustrate, consider global examples of family offices like Cascade Investment, founded by Bill Gates in Washington State, USA, and Bezos Expeditions, established by Jeff Bezos, the founder of Amazon.com. These real-world instances help demonstrate the practicality and advantages of employing a family office.

Current Landscape of Singapore Family Offices

Singapore significantly has risen in the number of newly established family offices. It was estimated around 400 family offices were set up in 2020 alone. Attributions can be seen not only to Singapore’s political and economic stability but also to the concerted efforts of the Family Office Development Team (FODT), a collaboration between the Monetary Authority of Singapore (MAS) and the Singapore Economic Development Board (EDB). The FODT aims to enhance Singapore’s position as a global hub for asset management and family offices, along with the appeal of tax incentives.

In Singapore, we have examples like “Sassoon Investment Corporation,” founded by Victor Sassoon, who serves as the Executive Chairman of the Rubina Watch Company, and “Rumah Group,” established by Stanley Tan, the Executive Director and Chief Executive Officer of Global Yellow Pages Ltd. These entities engage in asset management and investment activities

Tax Benefits for Singapore Family Offices

Singapore is a preferred destination for establishing family offices due to its attractive taxation schemes. There are three main tax exemption schemes designed to encourage family offices in Singapore, each with its own eligibility criteria and benefits.

13CA (Offshore Fund Scheme) 13R (Resident Fund Scheme) 13X (Enhanced Fund Scheme)
Basis Section 13CA of the Income Tax Act (ITA). Article 13R of ITA.  Article 13X of ITA. 
Eligibility Available to residents outside Singapore with a fund structure of a company, trust company, or individual.  Available to entities tax-resident in Singapore with a fund structure of a domestic company.  No restrictions on the place of residence or fund structure.  
Tax Exemption Provides exemption for specified income generated from designated investments. Provides exemption for specified income generated from designated investments.  Provides exemption for specified income generated from designated investments.  
Income Tax Return Not required. Required.  Required.  
VCC Not applicable.  Applicable.  Applicable. 
Considerations This scheme is ideal for families residing outside Singapore. However, it comes with certain restrictions, including limitations on the fund’s structure and the inability to utilise Variable Capital Companies (VCC).  A minimum annual expenditure of S$200,000 is mandated. 

While this scheme necessitates tax residence in Singapore, it offers more flexibility compared to 13CA. 

  

A minimum annual expenditure of S$200,000 or more, and a minimum fund size of S$50,000,000 at the time of application are required.  

This scheme offers the highest level of flexibility as there are no residency requirements. However, it comes with specific hurdles, including substantial funding requirements. 

In summary, Singapore’s tax exemption schemes cater to a wide range of family office structures and residency situations. The 13CA scheme is suitable for families residing outside Singapore, while the 13R and 13X schemes offer flexibility but come with varying requirements and obligations.

SFO vs. MFO: What’s the Differences?

It’s important to note that a Single Family Office (SFO) operates under a different regulatory framework compared to a Multi-Family Office (MFO). Here’s the distinction:

  • SFO:
    SFOs are not required to be registered or licensed by the Monetary Authority of Singapore (MAS). Why? Because they exclusively manage the assets of a single family, eliminating the need for third-party fund management.
  • MFO:
    On the flip side, MFOs must obtain licensing or registration with MAS. This is because they engage in the management of funds from multiple families, which necessitates regulatory oversight.

Requirements for Establishing a Single Family Office (SFO) in Singapore

  • Obtaining a licence:

    When establishing a Single Family Office (SFO) in Singapore, it’s essential to be aware of the licensing obligations outlined in the Securities and Futures Act (SFA) and the Financial Advisers Act (FAA). These regulations ensure that SFOs adhere to specific standards and procedures.

    Under the SFA, SFOs often fall under the “fund management” category, which may require them to obtain a Capital Markets Services License. However, it’s worth noting that there are provisions for exemptions from this licensing requirement, which can be advantageous.

    Similarly, the FAA may classify SFOs as “Financial Advisers,” mandating the acquisition of a “Financial Adviser’s License.” Nevertheless, there’s a significant exception to consider: if an SFO exclusively provides advice to associated companies, it might qualify for an exemption from this licensing obligation

  • Minimum Staffing Requirements:

    Building a capable team is crucial. You must have at least two investment professionals (referred to as ‘IPs’) on board. You’re granted a one-year grace period to fulfill this requirement, ensuring that your team is primed for excellence.

  • Business Spending:

    Managing wealth requires an investment in your operations. Your annual business spending depends on your AUM:

    • For AUM < S$50 million: S$200,000
    • For AUM > S$50 million and < S$100 million: S$500,000
    • For AUM >= S$100 million: S$1 million

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FAQs

What is Singapore’s income tax rate?2021-09-06T15:44:02+08:00

Singapore’s personal income tax rates for resident taxpayers are progressive. This means higher income earners pay a proportionately higher tax, with the current highest personal income tax rate at 22%

Why is it necessary for Singapore to have tax exemptions on international air travel and shipping income?2021-09-06T15:43:25+08:00

The countries to which these tax exemptions apply are heavily involved in shipping and air routes to and from Singapore. Therefore, these exemptions encourage the people of these countries to continue to engage with and conduct business activities in Singapore.

Why must Singapore have Tax exemptions on International aire travel and shipping income?2020-06-22T11:38:39+08:00

The countries to which these tax exemptions apply are heavily involved in shipping and air routes to and from Singapore. Therefore, these exemptions encourage the people of these countries to continue to engage with and conduct business activities in Singapore.

What are the most recent changes to Singapore’s income Tax Rates?2020-06-22T11:36:06+08:00

Singapore’s current maximum personal income tax rate is 22%. This represents an increase from the prior maximum rate of 20%. On the other hand, the corporate income tax rate has steadily declined over the years. It once sat at 26% but is now at 17%.

Which Business Entities do not qualify for the Start-up tax exemption scheme?2021-09-06T15:42:42+08:00

Not all business entities in Singapore are eligible for the government’s tax exemption. Only private limited companies, foreign subsidiary companies, foreign branch companies, and Singapore offshore companies qualify for it. Therefore, business entities such as sole proprietorships, partnerships, and limited liability partnerships may not receive the tax exemption.

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