Setting Up A Family Office In Singapore + Tax Incentives

  • Post category:Singapore

A family office in Singapore is a private wealth management company. It serves as a centralized hub for managing and preserving the wealth, investments, and assets of high-net-worth families. 

Family office singapore

These offices are typically established by wealthy families seeking to consolidate their financial affairs, ensure long-term wealth preservation, and create a legacy for future generations. With Singapore’s robust financial infrastructure, favorable tax regime, and reputation as a global financial center, family offices in the country have flourished, attracting families from around the world to establish a presence and benefit from its strategic location and wealth management expertise.

WHAT ROLES DOES A FAMILY OFFICE IN SINGAPORE?

A family office in Singapore performs various roles to cater to the specific needs and objectives of affluent families. Some of the key roles of a family office in Singapore include:

  • Wealth organization – Singaporean family offices offer comprehensive wealth management solutions, such as portfolio diversification, investment management, risk management, and financial planning.
  • Estate Planning and Succession – In order to facilitate a seamless transfer of wealth from one generation to the next, family offices offer assistance in creating and implementing appropriate estate planning strategies.
  • Tax Planning – Singapore’s family offices are experts in tax planning and optimization strategies. They offer advice on structuring investments in a way that minimizes taxes, arranges for taxes abroad, and follows the local tax laws.
  • Risk Management – Families can identify and manage potential threats to their money and assets with the help of family offices.

WHY SET UP A FAMILY OFFICE IN SINGAPORE?

  • Favorable macro-economic environment and a large number of business partners

One of the best environments for wealth management is found in Singapore. The high levels of socioeconomic and political stability will provide an ideal setting to set up the family office. Along with stability in the nation, the applicant may anticipate great ease in setting up and running the firm.

More than 700 domestic and international financial institutions, as well as other professional services companies, are located in Singapore, a significant financial center. Singapore is home to all Big 4 accounting firms, and the city-state is renowned for the effectiveness of its legal system. The establishment of the Singapore Mediation Centre and the Singapore International Arbitration Centre, which provide numerous ways for the organization to promptly deal with disputes, further enhanced this.

The family office has a wide range of partner and investment alternatives thanks to the numerous financial and professional institutions. Given Singapore’s membership in numerous global and regional organizations, including the Financial Action Task Force and the Asia-Pacific Group on Money Laundering, the applicant can anticipate that financial industry regulations in Singapore will adhere to international standards, ensuring the compliance of the company on a global scale.

Singapore is in accordance with the Exchange of Information requirements set by the Organization for Economic Co-operation and Development, demonstrating the importance of international cooperation in addition to conforming to the same high standards as those established by international standards. As a result, it gains even more credibility and is simpler to work with foreign businesses or financial partners.

  • Establishment and enlargement of the Variable Capital Company

Variable Capital Companies (VCC), recently introduced by the Variable Companies Act, which took effect in January 2020, is a new corporate form for investment funds that provides more flexibility and privacy. Because of this, single-family offices are given the same liberty when it comes to issuing and redeeming shares and paying dividends using capital.

Investment managers can ring-fence their investments of varying risk levels by dividing VCCs into sub-funds. Only the appropriate authorities will need access to the shareholder register, which is not generally available.

In addition, an update to Singapore’s Skills Framework for Financial Services attempts to more clearly define the qualifications, primary duties, and performance standards for a family office advisor.

This document, which was released by the Monetary Authority of Singapore in collaboration with the Institute for Banking and Finance Singapore, aims to give training providers and financial sector professionals more clarity about what they need to train or enter the family office advisory scene as well as assist family offices in finding qualified employees. This will provide the future family office additional options when hiring by contributing to the growth of Singapore’s family office advising market.

  • Retirement and residency planning

For investors who meet specific requirements, the Economic Development Board’s (EDB) Global Investor Programme also grants permanent residency. If they invest a minimum of S$2.5 million in a family office based in the country that has a minimum of S$200 million in assets, they will be eligible for residency specifically through the family office route if they have five years of relevant managerial and entrepreneurial experience and S$200 million in investable assets.

Finally, given Singapore’s high level of openness to foreign investment, all the advantages of incorporating in Singapore would apply to the applicant, whether they are an international or domestic investor. As a result, Singapore is an excellent place for them to retire.

Given that Singapore is one of the few nations to have continued to draw foreign direct investment during the COVID-19 period, one can expect that the business and regulatory environment in the nation is not only very welcoming of foreign investment but also very skilled and experienced in dealing with foreigners and foreign investment. This will make sure that both the incorporation of your Singapore family office and the management and operation of it go smoothly.

TAX INCENTIVES FOR SINGAPORE FAMILY OFFICES

The development of an SFO-based organization in Singapore frequently takes advantage of the Singapore Resident Fund Scheme of Section 13O (previously known as 13R) and the Enhanced-Tier Fund Tax Incentive of Section 13U (formerly known as 13X), both provisions of the ITA. The following are important incentive requirements that apply to investment vehicles managed by SFOs that are not required to have licenses under the Securities and Futures Act of 2001.

SECTION 13U- ENHANCED-TIER FUND TAX INCENTIVE SCHEME (FORMERLY 13X)

  • At the time of application, the minimum asset under management (AUM) is S$50 million.
  • A family office must hire a minimum of three investment experts. (At least one of the investment professionals must not be a relative. There will be a one-year grace period for businesses to adopt this.)
  • The scheme must receive MAS approval.
  • The MAS must approve any changes to the investment strategy.
  • Subject to the following tiers of minimum local business spending:

S$500,000 for AUM of S$50 million and above, but less than S$100 million

S$1,000,000 for AUM of S$100 million and above

  • Make local investments of at least 10% of AUM or S$10 million, whichever is less (with a two-year grace period).

SECTION 13O- SINGAPORE RESIDENT FUND SCHEME (FORMERLY 13R)

  • At the time of application, the minimum AUM must be S$10 million, with a promise to raise fund size to S$20 million within two years.
  • A family office must hire at least two investing professionals. (Firms will have a year-long grace period before having to hire the second investment specialist.) The MAS must approve the plan.
  • Changes to an investment strategy require MAS approval.
  • Subject to the following tiers of minimum business spending:

S$200,000 for AUM of less than S$50 million

S$500,000 for AUM of S$50 million and above, but less than S$100 million

S$1,000,000 for AUM of S$100 million and above

  • 10% of AUM or $10 million, whichever is less, must be allocated to local investments (with a two-year grace period)
  • Ownership limitations must be followed; if not, a financial penalty will be applied.
  • A Singapore firm in legal form that has never conducted business there before is required.

HOW TO SET UP A FAMILY OFFICE IN SINGAPORE

Setting up a Singapore Family Office involves several steps. Here’s a general overview of the process:

  • Determine Eligibility – Make sure to comply with the Monetary Authority of Singapore’s (MAS) eligibility requirements. 
  • Structure Selection – Determine the family office’s organizational structure. You can choose between a Multi-Family Office (MFO), which services multiple families, and a Single-Family Office (SFO), which serves one family.
  • Engage Professional Advisors – Seek the assistance of professional advisors such as Relin Consultants, who specialise in setting up family offices in Singapore. We can guide you through the process, handle legal and regulatory requirements, and provide expertise in structuring the family office.
  • Incorporate a Company – Register and incorporate a company in Singapore. One can choose either a private limited company or a limited liability partnership (LLP). Refer to Singapore company formation to know more.
  • Office Location and Substance – Create a physical presence in Singapore for the family office. This involves reserving office space and employing licensed experts who can perform important tasks linked to wealth management and administration.
  • Wealth Management and Advisory Services – Establish a detailed wealth management plan and specify the services the family office will provide. Establish the approach to investing, the risk management system, and the advisory services that will be offered to family members.

Reach out to us at Relin Consultants for further assistance with your Family office Singapore.

FAQs

What is a Family Office?

A family office is a private wealth management organisation that offers high net worth households all-inclusive financial and advisory services. It helps them with wealth management, investment portfolio management, estate planning, and other financial matters.

Where do family offices put their money?

Depending on your Family Charter or instructions, family offices may invest in a variety of choices. Depending on your desired rate of return and level of risk, they would often invest in the conventional range of financial assets like bonds, securities, or real estate.

What services do Family Offices offer?

Investment management, wealth planning, tax planning, estate administration, charitable advising, family governance, risk management, and concierge services catered to the particular needs of the family are a few of the services provided by family offices.

Are family offices governed in Singapore?

Yes, they are, but single family offices—offices that exclusively serve one family and their connections—are free from the licensing requirement.

Can I set up a Single-Family Office (SFO) or a Multi-Family Office (MFO) in Singapore?

Yes, both Single-Family Offices (SFOs) and Multi-Family Offices (MFOs) can be set up in Singapore. An SFO serves a single high net worth family, while an MFO serves multiple families.

Do Family Offices in Singapore require licensing?

Multi-Family Offices (MFOs) that offer investment advising services typically need a Capital Markets Services (CMS) licence from the MAS. Single-Family Offices (SFOs) are often free from licensing requirement

Can Family Offices in Singapore manage investments globally?

Yes, Singaporean family offices are capable of managing investments worldwide. Singapore has a strong financial industry with access to worldwide markets and a network of service providers that can help with wealth management and overseas investments.