Family Office

Family Office

Why set up a family office

Due to the speedy growth of wealth and affluence in the region over the past decade, there has been an exponential increase in the number of super-rich individuals and families. Asia has one of the fastest-growing populations of high net-worth individuals (“HNWIs”), leading to a deep concentration of wealth.

Traditionally, families have held their investments through holding companies or special purpose vehicles (SPVs). Usually, this was due to the need to maintain confidentiality, the perceived simplicity of setting up in offshore jurisdictions, and to achieve ring-fencing through separate SPVs. 

There are numerous reasons for setting up a family office but one common reason is that families are looking to in-source the fund management function and to be more involved in the management of their financial assets. Quite often, the investment team also include the next generation family members who not only want to manage their own wealth but also gain experience and build a track record with a view of managing third party wealth in the future.

The setting up of a family office is paired with the setting up of a family fund. The set-up of a family fund establishes the structure for the family’s assets, maintain all their financial assets, facilitates succession planning and creates a more efficient management structure.

Why Singapore

Singapore, given its standing as a leading financial hub, has increasingly become the jurisdiction of choice for the set-up of a family office and family funds due mainly to the followings:

  1. has a strong and well-regulated financial framework
  2. has an established financial services industry and well-developed infrastructure
  3. has stable and pro-business Government policies
  4. an attractive tax regime and policies
  5. is highly regarded for its transparency
  6. availability of skilled labour force and talent pool in private banking, asset management, finance sectors

The trend of family offices is expected to grow and Singapore is well positioned to be a base for family offices.

Family office structure

The family office has for a long been a familiar concept in both Europe and the USA. With the growth of wealth in Asia, the family office has emerged as a popular wealth management solution that can be tailored to meet the needs of HNWIs and their families. It is essentially a fund management advisory company set up to oversee the administration, preservation, growth, and intergenerational transfer of a high net-worth family’s assets and investments. In a Single-Family Office (SFO), the legal entity manages the financial and personal matters for one family and is wholly owned by the family members of the same family.

Tax incentives

To encourage the establishment of family offices in Singapore, the Singapore Government has provided tax exemption incentives for funds managed by family offices. Therefore, the funds managed by family offices will not pay Singapore income tax on almost all investment gains. The 13R and 13X schemes under the Singapore Income Tax Act (SITA) is overseen by the Monetary Authority of Singapore.

The exemption schemes are as follows:

  • Onshore Fund Tax Incentive Scheme (Section 13R)
  • Enhanced-Tier Fund Tax Incentive Scheme (Section 13X)

Key features and requirements of the schemes

 

 13R13x
Fund’s residenceMust be a tax resident of SingaporeNo restrictions
Assets under management (AUM)No restrictionsMinimum SGD50 million at the point of application
Fund administratorSingapore-based and holding a capital market services (“CMS”) licence
Shareholding/investorsMust not be 100% owned by Singapore investorsNo restrictions on Singapore investors
Fund expenditureAt least SGD200,000 per yearAt least SGD200,000 Local business spending in a year
Reporting requirementAnnual reporting to investorsNot required
Income tax filingAnnual tax returns to IRAS
Approving Authority

Requires Monetary Authority of Singapore (“MAS”) approval for tax exemption scheme to apply

No change of investment mandate after approval

Number of employment passes13