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post-epidemic era, rich people all over the world are looking for asset safe havens, and family office has also become a hot word. Singapore economy has always been known for its openness and good regulation. Therefore, for many high-net-worth individuals or families, Singapore is not only a leading financial service hub, but also a gateway to the Asia-Pacific region. Setting up a family office in Singapore has become the first choice for many high-net-worth individuals and families, and many super rich people have set up family offices in Singapore.
1. Family Office & Singapore Family Office
1. What is a family office?
The concept of a family office is very flexible and is essentially an entity that serves high net worth ("HNW") families. The primary function of a typical family office is to manage assets for one or more high net worth families. These assets may be held by exclusive investment entities, and the related investment entities are part of a more macro wealth planning structure. The family office can also provide concierge services, which can include routine affairs of family management, as well as the management of valuable assets and property.
Single Family Office (“SFO”) is a family office that provides services to members of the same family. The United Family Office (“MFO”) provides services to members of different families. Single-family offices are becoming increasingly popular and becoming an important part of the wealth planning industry.
2. What is Singapore Family Office Project?
Singapore Economic Development Bureau as early as 2004, the Global Investor Programme was launched. The family office plan in this program is to encourage foreign applicants to set up family offices in Singapore and apply for immigration after passing the review. In the 2020 fiscal budget, Singapore will further deepen the family office system that has been implemented for many years, especially expanding the coverage of tax exemptions, and extending the current tax exemption policy until 2024.
The Singapore Family Office Project is also an immigration project launched by the Singapore government for people with high net worth. The structure of the Singapore Family Office is that the main applicant sets up two companies in Singapore by themselves or family members. One is a fund company that holds various assets owned by the family, and the other is a fund management company (also known as a single family office), which provides fund management services to the fund company.
Fund companies can apply for the application of the tax exemption plan in Singapore's Income Tax Act 1947, namely the 13O Plan and the 13U Plan. Based on the needs of managing family wealth, fund management companies can hire family members and local professional applicants as investment managers. Applicants can serve as directors of the fund management company. Eligible family members can then apply for the Singapore Job Pass (EP) and go to Singapore for investment management. At the same time, family members of EP holders, including spouses, unmarried children under the age of 21 and parents can obtain Singapore visas by applying for a family pass (DP) or a long-term visit visa (LTVP).
On April 11, 2022, the Monetary Authority of Singapore announced that funds directly managed by the family office comply with the updated terms of the Articles 13O and 13U tax exemption schemes. Under the new regulations, the investment threshold is raised. Under the 13O plan, the minimum asset management scale of the fund is 10 million SGD, and it will be increased to 20 million SGD within two years. The new regulations came into effect on April 18.
3. Overview of Singapore Family Office
According to data from Singapore Monetary Authority (MAS), as of the end of April this year, the Monetary Authority of Singapore has received applications from 143 family offices. As of 2020, the number of single-family offices settled in Singapore exceeded 400. By the end of last year, the number had surged to 700 family offices, while in 2018, there were only 27.
So far, including Ray Dalio, founder of Bridgewater Fund in the United States, co-founder of Google , Sergey Brin, founder of Dyson in the United Kingdom, James Dyson in the United Kingdom, founder of Haidilao , founder of Zhang Yong , and his wife, and the Hong Kong rich man Li Ka-shing , all of whom have opened family offices in Singapore. Foreign media reported in July that the Harvard Management Company (HMC) also plans to open an office in Singapore to expand its investment portfolio in the region.
2. Advantages of setting up a family office in Singapore
1. Global asset allocation
Singapore has a complete financial system, no foreign exchange controls, and a neutral and independent international political stance. At the same time, Singapore is a leading financial service hub, opening multiple international direct routes, closely linked to investment hotspots and fashion capitals around the world, and is a gateway to the Asia-Pacific region. Singapore’s economy has always been known for its openness and good regulation, and its dynamic ecosystem of bankers, trustees and consultants is ready to provide quality services at any time.
2. The tax rates for individuals and businesses in Singapore are relatively low
The Monetary Authority of Singapore ("MAS") and the Economic Development Bureau of Singapore ("EDB") both adopt a profit-making attitude, and the relevant measures are effective.
3. Singapore's political situation is stable
The Singapore government is honest and efficient, and investing in Singapore can better ensure the safety of funds. In addition, Singapore is the first in the safety management field, and its medical level is also one of the highest countries in the world.
4. Global Top Education
Singapore takes bilingual teaching as its teaching principle, and can give the next generation a good foundation in English and native language. According to the 2022QS world university rankings, National University of Singapore has always ranked first in the Asian university rankings.
5. Overseas identity planning
Applicants who set up a family office can obtain Singapore tax resident status by applying for a work permit (EP), which can avoid financial information exchange (CRS). Applicants can also apply for a family visa for their spouse and children under the age of 21. After obtaining a work visa, applicants can freely choose to change their permanent resident status or apply for a Singapore passport. Holding a Singapore passport can be visa-free for 192 destinations, freely pass through many countries such as the United States, Canada, Japan, and many other countries such as , EU , and Singaporean citizens can enter mainland China without a visa. For business people, this visa-free status advantage can greatly save time and travel around the world will be very convenient.
3. Singapore Family Office Architecture
Singapore Family Office can take the following form:
① Single family office: manage assets for one family or on behalf of one family; or
② Joint family office: manage assets for multiple families or on behalf of multiple families.
According to the needs of each family, the fund structure of the family office can range from a simple investment holding structure to a comprehensive structure that includes multiple trusts, sub-trusts with individual beneficiaries, private trust companies, multiple funds and complex asset classes, etc. In the simplest structure, family members directly hold family offices and funds. Two Singaporean companies are established by the main applicant, one company holds assets (the company can be held by a trust company to strengthen the protection of wealth); one is the asset management company (family office) to manage the assets held by another company. Here, we will mainly introduce two common single-family office architectures.
Single Family Office Structure 1: Contains Trust
This is the most common structure in a family office owned by a private family trust . Under this structure, the family office can obtain license exemption based on existing provisions in the Securities and Futures Act because the family office and fund entity are affiliated companies by the holding company. This structure is ideal for families seeking solutions for complete inheritance and wealth planning. Family trusts can use this structure to ensure smooth inheritance process and benefit young beneficiaries.
Single family office is structure 2: Family members are direct shareholders
Under this structure, if the fund entity and family office are directly held by a family trust or family member, the existing provisions in the Securities and Futures Act do not apply, and the family office needs to apply for a specific license exemption from the Monetary Authority of Singapore. This structure is ideal if it doesn’t make sense to consolidate ownership from an individual or business perspective.
4. Application requirements for Singapore Family Office (13O/13U)
1. Asset requirements
①13O project
When applying, the minimum fund size is 10 million SGD, and it is promised to increase its asset management scale to 20 million SGDD within a 2-year grace. When applying for
②13U project
, the minimum fund size is SGD 50 million (promised to invest in real estate, infrastructure, private equity, debt and credit funds).
2. Number of people employed
①13O project
Family office needs to hire at least two investment specialists (can be family members or non-family members), and these investment specialists should have relevant academic background or professional experience. If the family office is unable to hire two investment specialists at the time of application, a one-year grace period can be obtained to hire a second investment specialist.
②13U project
Family offices need to hire at least three investment specialists, at least one of which is a non-family member. If the family office is unable to hire a non-family member as an investment specialist at the time of application, a one-year grace period can be obtained to achieve that goal.
3. Office expenditure requirements
①13O project
13O family office management fund companies need to meet the following requirements:
a. The asset size is less than 50 million SGD, and the annual local expenditure must reach 200,000 SGD;
b. The asset size is greater than 50 million SGDs, less than 100 million SGDs, and the annual local expenditure needs to reach 500,000 SGDs;
c. The asset size is greater than 100 million SGDs, and the annual local expenditure needs to reach 1 million SGDs;
②13U project
13U family office fund companies manage the annual local expenditure needs to meet the following requirements:
a. The asset size is greater than 50 million SGDs, less than 100 million SGDs, and the annual local expenditure needs to reach 500,000 SGDs;
b. The asset size is greater than 100 million SGDs, and the annual local expenditure needs to reach 1 million SGDs;
4. The investment scope of the fund company is limited to
13O or 13U family office management funds Always ensure that at least 10% of the total assets or SGD 10 million (both are lower) is used for local investment in Singapore, such as investing in:
① securities of Singapore Stock Exchange (SGX);
② Singapore-specific bonds;
③ funds issued by local qualified fund companies in Singapore;
④ Private equity of unlisted local Singapore companies.
5. Information required for establishing a Singapore family office
1. Personal information of the applicant (company shareholders/directors) (including passport, ID card, email address, contact number, etc.);
2. Proof of the applicant (company shareholders/directors) overseas address (resident address);
3.2 companies - basic information of family offices and fund companies (including company name, shareholder allocation ratio, etc.);
4. Applicant's fund source documents (mainly the fund source explanation document of the private bank);
5. The applicant's detailed personal resume includes past education and work experience.
6. Frequently Asked Questions for Family Office in Singapore
1. Is it necessary to build a family trust when setting up a Singapore home office?
When setting up a Singapore family office, it is not necessary to set up a family trust, but considering the advantages of family trusts in wealth inheritance, risk isolation , privacy protection, etc., the upper-level structure of the fund entity can be set as a family trust to avoid individual shareholding as much as possible.
2. If the applicant's asset management scale exceeds SGD 50 million, choose a 13O project or a 13U project?
applicants should not decide to choose the 13O or 13U tax incentive plan based on the size of the fund, but should consider the nature of the fund and whether the fund can meet the threshold requirements of the corresponding tax incentive plan.
For example, 13O has restrictions on fund legal entities, and the legal entities of the fund must be Singapore-registered companies. 13U is more flexible, has no restrictions on fund legal entities and no restrictions on fund jurisdiction.
If the applicant needs a more flexible structure, then it should be considered to apply for the 13U project. However, if the applicant tends to be a Singapore-centric structure, the applicant should consider applying for the 13O program.
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