The Singapore government has made significant efforts to boost the fund management sector by introducing various tax incentive schemes for funds managed by Singapore-based fund managers under Sections 13D (Offshore Fund Tax Exemption), 13O (Onshore Fund Tax Exemption) and 13U (Enhanced-Tier Fund Tax Exemption), which exempt specified income (SI) derived from designated investments (DI).
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Our panel of lawyers is familiar with Singapore’s tax regulations and work with a team of tax specialists for compliance, planning and advisory including preparation and filing of taxes (e.g. estimated chargeable income), application for tax exemption schemes with the Inland Revenue Authority of Singapore (IRAS), computation of tax, monitoring statutory deadlines for filing and liaison with the IRAS, among other services. Please contact us for assistance.
Offshore Fund Tax Exemption
Section 13D:
This tax incentive is aimed at attracting foreign investors to use Singapore-based fund managers to manage their offshore funds as many investors may still prefer to set up funds outside Singapore due to their knowledge, familiarity and preferences of foreign jurisdictions over Singapore. To this end, SI derived by a “prescribed person” from funds managed by a Singapore-based fund manager in relation to DI is exempted under section 13D.
This exemption applies to companies, trusts and individuals and there is no requirement to apply to the MAS for this exemption. In contrast to 13O and 13U incentives, section 13D is attractive because there is no minimum fund size requirement nor minimum local expenditure requirement. Among other conditions, to be eligible under section 13D, the fund must not be resident in Singapore and must be managed by a Singapore-based fund manager who holds, or is exempted from holding, a capital markets services licence in Singapore.
Onshore Fund Tax Exemption
Section 13O:
This tax incentive is introduced to encourage investors to set up onshore funds in Singapore. To this end, SI derived by an “approved company” from funds managed by a Singapore-based fund manager in relation to DI is exempted under section 13O.
This exemption applies to Singapore-incorporated companies including VCCs and requires an application to the MAS. To qualify for an exemption under section 13O you will need to:
- Manage at least S$10m and should be committed to increasing the fund size to up to S$20m within 2 years
- Employ a minimum of two investment professionals
- Ensure that the scheme and its changes should be approved by the MAS
- Adhere to a spending limit where S$200,000 for an AUM of less than S$50 million applies. But there are other limits as well which we will help with.
- Invest a minimum of 10% of AUM or S$10 million or whichever is lower, in local investments (with a 1-year grace period)
Enhanced-Tier Fund Tax Exemption
Section 13U:
This tax incentive applies to both onshore and offshore fund and accommodates the broadest range of fund structures. To this end, SI derived by an “approved person” from funds managed by a Singapore-based fund manager in relation to DI is exempted under section 13U.
This tax exemption applies to companies, trusts, limited partnerships and all forms of fund vehicles including VCCs and requires an application to the MAS. To qualify for an exemption under section 13U you will need to:
- Manage at least S$50m
- Employ three investment professionals and from them, one needs to be a non-family member
- Ensure that your scheme and the changes in the investment strategies are approved by the MAS
- Adhere to the spending limit where minimum investments in local business spending should be S$500,000 for an AUM of S$50 million and above and S$1,000,000 for an AUM of S$100 million and above
- Invest at least 10% of the assets under management or S$10 million, whichever is lower, in local investments where a 1-year grace period applies