13O 13U

Singapore Tax Incentive Schemes for Fund and Fund Managers

Singapore’s status as a prominent Asian hub for fund management can be attributed, in part, to its comprehensive tax incentive schemes. Many global fund houses have recognized Singapore as an ideal regional hub, choosing to establish their portfolio management, trading, and research operations within the country.

To solidify its position as a leading Asian fund management and domiciliation hub, the Monetary Authority of Singapore (MAS) is strategically leveraging its external fund management program to enhance asset management capabilities within Singapore. Concurrently, MAS collaborates closely with industry stakeholders to position Singapore as a prominent regional hub for fund domiciliation, an objective facilitated by the implementation of the Singapore Variable Capital Company (VCC) framework. Moreover, Singapore’s attractive tax framework and incentives for funds and fund managers serve as key catalysts in these endeavors.

It is important to note that funds managed by Singapore-based fund managers may be subject to tax in Singapore due to the investment management activities performed within the country. The income and gains derived by these funds could be deemed Singapore-sourced and thus subject to taxation, contingent upon the onshore or offshore classification of the fund and its taxable presence in Singapore. However, Singapore’s tax incentives aim to alleviate such tax obligations, provided that specific conditions are met.

Singapore’s conducive regulatory environment, extensive array of service providers, and favorable tax incentives have collectively contributed to the sustained growth and attractiveness of its fund management industry. By offering these enticing features, Singapore continues to establish itself as a premier destination for fund management within the Asian region.

Singapore Tax Exposures for Funds:

Funds managed by a fund manager in Singapore may be subject to tax in the country due to their investment activities. The income and gains generated by these funds may be considered Singapore-sourced and taxable, depending on whether the fund is based onshore or offshore. However, Singapore offers tax incentives that can eliminate these tax liabilities if certain conditions are met.

Tax Incentive Schemes in Singapore for Funds:

All fund management companies in Singapore must be licensed and registered with the Monetary Authority of Singapore (MAS). This requirement is necessary to qualify for the tax incentive schemes.

Under these schemes, certain income derived from funds managed in Singapore by a fund manager is exempt from taxation. The investments covered under these schemes include stocks, company shares, bonds, notes, commercial papers, treasury bills, certificates of deposit, derivatives, and more. However, immovable property in Singapore is not eligible for these incentives.


MAS Announces Stricter Criteria for Singapore’s 13O and 13U Fund Management Tax Incentive Schemes

Singapore’s Monetary Authority of Singapore (MAS) recently announced significant changes to the criteria for the Section 13O and 13U fund management tax incentive schemes. These changes are targeted at fund vehicles managed by family offices. The new criteria will take effect from 18th April 2022, and it is important for potential applicants to be aware of these changes and consider their options promptly.

Cases Covered by the New Criteria

The new stricter criteria will apply to cases where the first “preliminary submission” is made from 18th April 2022. However, cases that have already been granted the Section 13O or 13U awards by MAS or are in the process of application will generally not be affected. It’s worth noting that if a pending application has been stagnant with no communication with MAS for six months or more, MAS may require the application to be restarted under the new criteria.

Enhancements to the Award Criteria

For Section 13O Cases

  • The fund must now have a minimum fund size of S$10 million at the point of application and must commit to increasing its assets under management (AUM) to S$20 million within two years.
  • The family office must have a minimum of two investment professionals (IPs), with a grace period of one year to employ the second IP.
  • The absolute minimum total business spending annually remains at S$200,000, but this is subject to a new ‘tiered business spending framework’ pegged to AUM size.

For Section 13U Cases

  • The existing minimum fund size of S$50 million at the point of application remains unchanged.
  • The family office must have at least three IPs, with at least one IP being a non-family member. A grace period of one year may be given for the non-family member IP.
  • The absolute minimum local business spending annually is raised to S$500,000 (from S$200,000) in any basis period, and is also subject to a new ‘tiered business spending framework’ pegged to AUM size.

Common Requirements for both Sections 13O and 13U

Both Section 13O and 13U cases now have a new requirement for the fund to make local investments. This must constitute at least 10% of the fund’s AUM or S$10 million, whichever is lower, at any given time. Local investments include equities listed on Singapore-licensed exchanges, qualifying debt securities, funds distributed by Singapore-licensed/registered fund managers, and private equity investments into non-listed Singapore-incorporated companies with operations in Singapore.

If you’d like to read the full article and get more insights into the changes announced by MAS, you can find it here.

Disclaimer: This article is provided for informational purposes only and does not constitute legal advice. Professional legal advice should be sought before making any decisions or taking any actions based on the contents of this article.




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