Family Offices
Family offices are private wealth management advisory firms that provides a range of services (e.g. investment management, family administration, estate planning, management of luxury assets, philantrophy, consolidation of family’s accounts, tax filing / planning, facilitation of the day-to-day management of a family assets, avenue for families to discuss their private investment matters and strategies) to high-net-worth (“HNW”) clients and their financial needs.
The assets and wealth of HNW clients would be managed by a team of professionals (e.g. legal compliance, financial planning) employed by the family office, ensuring the safe management of the HNW clients’ resources.
A single family office (“SFO”) is one that provides services to members of the same family. This is contrasted with a multi-family office (“MFO”) which provides services to members of different families.
- Unit trusts
- Special limited partnerships
- Limited liability partnership
- Company limited by guarantee (“CLGs”)
- Variable capital companies (“VCCs”)
There are various considerations for families to consider when deciding where to locate their family office, including the jurisdiction of choice.
Singapore has quickly become the jurisdiction of choice to set up a family office due to the following reasons:
- Leading financial hub – access to a wide range of financial services and expertise
- Politically stable environment where many HNW individuals and their trusted advisors are happy to live
- Robust legal framework / strong regulatory environment
- Favourable tax regime for family offices
- SFOs can be used as part of the personal planning of HNW family members – Singapore SFO may sponsor employment passes and may even be used as part of an application for permanent residency by HNW family members under the Global Investor Programme.
Sourced from EDB
Family offices can be considered under these tax incentive schemes –
- Section 13U of the Income Tax Act – Enhanced-Tier Fund Tax Incentive Scheme
- Requirements:
- Minimum asset under management (“AUM”) of S$50 million at the time of application.
- Family office would be required to employ a minimum of 3 investment professionals (at least 1 investment professional has to be a non-family member. 1 year grace period for firms to implement this).
- Scheme must be approved by MAS.
- Changes in the family office’s investment strategy must be approved by the MAS.
- Subject to a tiered framework for minimum local business spending as follows:
- 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.
- Invest at least 10% of AUM or S$10 million, whichever is lower, in local investments (with 1 year grace period)
- Requirements:
- Section 13O of the Income Tax Act – Singapore Resident Fund Scheme
- Minimum AUM of S$10 million at time of application with a commitment to increase fund size to S$20 million within a 2-year period.
- Family office will need to employ a minimum of 2 investment professionals (1 year grace period for firms to employ the 2nd investment professional)
- Scheme must be approved by MAS.
- Changes in the family office’s investment strategy must be approved by the MAS.
- Subject to a tiered framework for minimum business spending as follows:
- S$200,000 for AUM of 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.
- Invest at least 10% of AUM or S$10 million, whichever is lower, in local investments (with 1 year grace period)
- Subject to ownership restrictions, otherwise financial penalty restrictions apply.
- Legal form must be a Singapore company and must not have previously carried on business in Singapore.
- No capital gains tax
- No capital gains tax on the sale of financial assets (e.g. stocks and bonds) in Singapore. Family offices can sell their investments without incurring any tax liability on the capital gains earned.
- Financial sector incentive – fund management scheme (“FSI-FM”)
- Family offices can apply for the FSI-FM scheme, where the fee income derived by a fund manager from managing a fund is subject to a tax rate of 10%, instead of the usual corporate rate of 17%.
- No withholding tax on dividends
- Singapore does not impose withholding tax on dividends received by individuals or companies. Family offices can receive dividends from their investments without incurring any withholding tax.
- No estate duty
- Legal form must be a Singapore company and must not have previously carried on business in Singapore.
For more information, please click here (link them to https://www.advomi.com.sg/tax-incentives-for-funds/ )
The SFOs in Singapore are typically designed to be exempt from regulation under local securities law – allowing the SFO to avoid the need to obtain licence / become registered to provide fund management services to the investment vehicles held by a HNW family.
We will be able to advise you on the exemptions in detail.
At Advomi, our lawyers can provide you with the following services for family offices:
- Setting up a family office, including advising on a suitable vehicle and structure (such as using investment holding structures or trusts)
- Tax advice
- Corporate governance, regulatory and compliance advisory
- Corporate finance and deal advisory
- Dispute advisory
- Regulatory audit
- Due diligence and transaction support
- Philanthropy consulting
- Income tax and GST compliance
- Personal tax and immigration
- Transfer pricing analysis and documentation
- Working with trusted advisers and investment specialist to supervise the assets of families and manage the same with efficiency, such as –
- Overall investment management
- Tax advisory
- Financial consultation
- Advice regarding financial steps
- Applying for relevant licences
- Applying for tax exemptions
- Registration as a fund manager