Family Office

Singapore's New Family Office Rules Highlight Competition Pressure

Tom Burroughes, Group Editor, 10 May 2022

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The changes require family offices in Singapore to devote a minimum amount to investing in the Asian city-state; it also sets other baseline requirements. The reforms, which took effect in mid-April, highlight how jurisdictions are crafting structures to attract wealth management that appear to be politically acceptable.

New Singaporean rules governing family offices are now in place. Taking force from 18 April, they mean family offices face a tougher regime to benefit from tax-exempt incomes, although the Asian city-state is arguably creating a level of regulatory certainty that did not previously exist.

Each fund must be worth at least S$50 million ($35.93 million), and 10 per cent of it or S$10 million – whichever is the smaller amount – should be invested in Singapore. Depending on size, family offices must spend S$500,000 to S$1 million in the domestic economy each year, rising from S$200,000. Additionally, of the three investment figures which they are required to hire, at least one must be a non-family member, the rules state. 

As noted by Bloomberg on 5 May, the development might appear perverse at a time when Singapore is vying to be the top wealth management centre in Asia, aiming to take business from Hong Kong. As the report said, Hong Kong intends to roll out tax breaks for family offices managing HK$240 million ($30 million) or more, hire at least two professionals and spend at least HK$2 million a year. However, the longer term trend might appear that Singapore has in place a regime that is both domestically acceptable and attractive internationally. 

Around the world, regulators are increasingly wrestling with how to treat single family offices, collectively overseeing trillions of dollars of assets. In the US, SFOs are exempt from direct regulatory oversight – prompting anger from some lawmakers. 

Singapore, as WealthBriefingAsia has noted, has a variable capital company (VCC) regime which has been in place since 2020. VCCs enable branches of a family with different goals to run separate sub-funds but pool their costs. To some extent the development mirrors the structure innovations that have taken place in Jersey, Guernsey, the Cayman Islands and other offshore centres.

“The rationale behind these changes is to recognise that the family office eco-system in Singapore has grown, and the applicable regulations, policies, and incentives should be updated accordingly,” lawyers at Dentons said in a briefing note on 12 April. 

The firm said: “The new conditions will only apply to fund vehicles that are managed or advised directly by a family office which is an exempt fund management company who manages assets for or on behalf of the family/families; and Is wholly owned or controlled by members of the same family/families.”

Under the Monetary Authority of Singapore’s definition, the term “Family” refers to individuals who are lineal descendants from a single ancestor, and includes spouses, ex-spouses, adopted children and stepchildren of these individuals. The new conditions will not apply to investment funds set up by other types of applicants (e.g., funds managed by licensed/registered fund managers, etc.).

As Dentons notes, new rules require a minimum fund size of S$10 million at the point of application and the fund must commit to increase its AuM to S$20 million within a two-year grace period. The minimum fund size for the tax incentive scheme in the jurisdiction remains unchanged at S$50 million at the point of application.

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