Singapore to Introduce Revised Tax Incentives for Family Offices
Singapore’s central bank is set to revise tax incentives and requirements for single family offices (SFO) to achieve key goals. We discuss the fresh incentives from the Monetary Authority of Singapore (MAS). Further, the 2023 Budget announced the Philanthropy Tax Incentive Scheme for Singapore family offices, to go in effect from January 1, 2024. Under that scheme, qualified applicants can receive a tax deduction of up to 100 percent, limited to 40 percent of the donor’s income.
The Monetary Authority of Singapore (MAS) — Singapore’s central bank — will introduce revised tax incentives and requirements for single family offices (SFO). MAS hopes to encourage SFOs to contribute to more jobs and value economic creation as well as philanthropic activities in the city state
The MAS has approved tax incentives for some 1,100 SFOs as of the end of 2022, an increase from 700 in 2021.
A family office is a wealth management firm set up by wealthy families to oversee the day-to-day management of their assets. A report by KPMG stated that Singapore is home to an estimated 59 percent of family offices located in Asia. Among the most notable people to establish a family office in Singapore is Google co-founder Sergey Brin, the former CEO of Fosun International Liang Xinjun, and Chairman of Reliance Industries Mukesh Dhirubhai Ambani.
According to MAS, SFOs that applied for tax incentives managed around S$90 billion (US$66.8 billion) of assets in 2021. This is less than two percent of the S$5.4 trillion (US$4 trillion) of assets managed in Singapore.
MAS is seeking to enhance incentives in five areas.
Investing in local businesses and the local equity market
The tax incentives will be expanded to recognize all investments in non-listed Singaporean companies. These include private credit.
MAS will also recognize twice the amount invested in Singapore-listed entities, unlisted funds that primarily invest in Singapore-listed companies, and eligible exchange traded funds (ETFs).
Creating jobs and value for the Singaporean economy
MAS will encourage SFOs that apply for tax incentives to contribute more to job creation in Singapore as well as value creation for the economy.
As such, SFOs will be asked to hire at least one investment professional from Singapore. Further, all new SFOs will now have to meet a local business spending requirement. Previously, this requirement could be satisfied through overseas spending. The government hopes this will channel more funds to Singapore-based businesses.
Encouraging SFOs to participate in blended finance structures
MAS aims to encourage SFOs to participate in blended finance structures. These are sources of funding that combine public and private sector funds or other resources that help address global development challenges.
MAS will give more recognition to concessional capital invested in these blended finance structures. Concessional capital is capital that accepts higher risks or lower returns that can help convert commercial capital into green projects. As such, for every Singaporean dollar (US$0.74) of concessional capital invested, MAS will recognize it as the equivalent of S$2 (US$1.48).
MAS will also recognize grants that SFOs provide to support blended finance structures.
Encouraging SFOs to invest in climate related projects
MAS will encourage SFOs to invest in climate related projects and such investments will be recognized as the SFO fulfilling its investments requirements. These climate related investments can be undertaken worldwide and are not limited to Singapore.
Encouraging SFOs to conduct philanthropic activities
MAS introduced the Philanthropy Tax Incentive Scheme in its 2023 Budget and will go live on January 1, 2024. The scheme aims to encourage giving overseas using a Singapore family office as a base. Eligible applicants can receive up to a 100 percent tax deduction, capped at 40 percent of the donor’s income.
To encourage local philanthropic activities, MAS will recognize donations to local charities as part of normal business spending.
- New Criteria for Family Offices in Singapore to Receive Tax Incentives
- New Stricter Requirements for Singapore’s Global Investor Program
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