Starting October 1st, family offices in Singapore must provide a background check report when applying for tax incentives

To improve the foreign capital flowing into the Singapore market, last Monday, the Monetary Authority of Singapore (MAS) once again introduced a regulatory tool for family office applications—

Funds managed by Singapore family offices must attach a background check report provided by a screening service provider designated by the Monetary Authority of Singapore when applying for family office tax incentives.Image source: Official website of Monetary Authority of Singapore

Officially Designated Reporting Institutions

Starting October 1, 2024, when applying for family office tax incentives, it is mandatory to submit background check reports issued by institutions designated by the Monetary Authority of Singapore. The MAS has also stated that the screening process typically takes about two weeks.

Currently, the Singapore government is actively working to reduce the waiting time for family office applications related to tax exemption programs. Starting next year, 2025, the waiting time is expected to return to the normal duration of about three months.

Which Funds are Exempt from Family Office Taxes in Singapore?

The family office tax exemption in Singapore is a measure designed to attract high-quality (ultra) high-net-worth capital through tax reductions and exemptions.

To be approved for the 13O or 13U tax incentives, funds managed by a family office must meet specific conditions regarding asset management, investment professionals, expenditures, capital allocation, and maintaining private bank accounts.

Image source: Official website of the Monetary Authority of Singapore

Currently, this measure has been extended until December 31, 2029.

13O

The Investment Fund Tax Incentive Scheme under Section 13O applies to the following three types of funds:

✅ Qualifying Private Equity Fund: Funds focused on investing in private company equity.

✅ Qualifying Venture Capital Fund: Funds focused on investing in startups and high-tech companies.

✅ Qualifying Infrastructure Fund: Funds focused on investing in infrastructure projects.

13U

The Investment Fund Tax Incentive Scheme under Section 13U applies to all types of funds, including the three types covered under 13O.

13O and 13U – The tax benefits offered include:

🔺 Exemption from income tax for fund management companies: Income and profits derived by fund management companies from managing qualifying funds, as well as related capital gains and dividend income, are exempt from corporate income tax.

🔺 Exemption from capital gains tax: Capital gains obtained by fund management companies from the sale or disposition of qualifying fund equities or assets are exempt from capital gains tax.

Image source: Official website of the Monetary Authority of Singapore

How can one successfully apply for a family office in Singapore?

From the current measures implemented by the Singapore government, which have increased regulatory scrutiny, it is clear that the application and management requirements for family offices and tax exemption schemes in Singapore have become more stringent in terms of audit direction, intensity, and timing.

Therefore, family office management companies should focus more on building a compliant governance framework, such as:

To ensure compliance with MAS regulations and to fully utilize the advantages brought by tax incentives, family office management companies should actively construct a robust compliance governance framework. This includes, but is not limited to:

▪️ Establishing a comprehensive internal control system (regular internal audits, risk assessment procedures, etc.);

▪️ Enhancing training for employees (especially those directly involved in financial transactions and client asset management) on relevant laws and regulations.

▪️ Continuously monitoring industry trends and maintaining an open and proactive communication with MAS to minimize legal risks caused by improper regulation.

▪️ Exploring advanced AI technology solutions to improve compliance and efficiency (such as using big data analysis to monitor transaction patterns and identify potential risk points, or using blockchain technology to enhance the transparency and security of asset management).

The essence of establishing a family office is to be prepared for the future, so grasping the roots of compliance and normalization of internal dynamic reforms is the most effective way to cope with various external changes.

We are a local global asset allocation consulting company in Singapore with 20 years of industry experience. Our project team members responsible for family office management in Singapore have an average of 15-20 years of practical industry experience. We have helped including globally renowned multinational corporations and ultra-high-net-worth individuals achieve their goals of establishing enterprises, funds, and identities in Singapore.

If you are interested in applying for a family office in Singapore but are unsure about how to successfully pass the official Singaporean review, feel free to contact us.