Singapore Family Office: Concept, Structure, Tax Incentives and Exemptions, Residency
Family offices are investment and wealth management vehicles designed to cater to the diverse financial needs of affluent families. Their services encompass family education, succession planning, tax planning, insurance, lifestyle management (such as travel and property management), asset allocation, bookkeeping, philanthropy, and legal services tailored to the family's requirements.
The typical structure of a Singapore family office begins with a holding company incorporated as a private limited company in Singapore. This holding company fully owns two separate entities: the Family Office, often formed as a private limited company, and an Investment Fund, structured as a Variable Capital Company (VCC). The VCC frequently functions as an umbrella fund, creating several sub-funds to mitigate risks and liabilities.
The Family Office serves as the fund manager, managing the wealth and investments of the family, while the Investment Fund holds the assets. Each sub-fund is designated for a specific family purpose. For example, the "Lifestyle" sub-fund may be allocated to cover expenses related to family members' education, travel, food, housing, and other lifestyle costs. The Wealth Management Sub-Fund invests the family's assets in shares or other types of assets, and the Tax Planning Sub-Fund covers tax planning expenses such as lawyer fees, consultation, and tax preparation.
In some cases, a trust may be added to the structure, owning the holding company to provide an additional layer of protection against creditors. Once assets are placed in a trust, they no longer belong to the grantor, protecting them from creditor claims. In the United States, some states require a specified period after asset conveyance before this protection takes effect to prevent fraudulent conveyance. The family office structure allows the family to retain 100% of the trust assets.
A single family office may qualify for a "Fund Management" exemption under the Singapore Securities and Futures Act (SFA Cap.289) and the Second Schedule of the Securities and Futures Regulation, as well as a Financial Advisory Service exemption under the Financial Advisers Act (FAA Cap. 110) and Financial Advisers Regulations, provided they manage funds for or offer financial advisory services to their related corporations.
Singapore offers tax incentive schemes, namely 13CA, 13X, and 13R, which correspond to sections in the Income Tax Act.
13CA for Offshore Funds: Offshore funds incorporated outside Singapore but managed by a Singapore-based manager can receive income tax exemption.
13R Onshore Funds: Income tax exemption is available for funds that are (1) incorporated, (2) tax resident in Singapore, and (3) managed by a Singapore-based manager. There is no restriction on the fund size to be eligible for this exemption.
Global Investor Program
Certain family members can obtain residency permits to reside in Singapore. Residing in Singapore allows them to benefit from low income tax rates on their personal and business income.