Family Office SG
Set up your own Single Family Office in Singapore
Singapore - an ideal place
for your wealth
Singapore, one of the world's largest financial centers, is known as the "Switzerland of the East." With no inheritance tax, no capital gains tax, and relatively low personal and corporate income taxes, it is a tax haven in Asia and the world, making it an ideal place for your wealth.
Deciding to set up a family office is only the first step. Here are seven key points to consider if you wish to establish a family office in Singapore. These points certainly don't cover everything, but they can serve as a good reference to understand some common considerations.
Seven key considerations when setting up a family office
What is your goal for setting up a family office in Singapore?
A family office is a centralized unit that helps coordinate various family activities.
These activities include providing a consistent investment strategy for the entire family, filing taxes, and consolidating accounts. Understanding the goals of setting up a family office will help in selecting appropriate considerations and thus developing the best structure for the family office.
For example, if one of the founders' primary goal is to ensure that key family members obtain legal eligibility for permanent work and residency in Singapore, they may need to appoint these family members as members of the family office's investment committee. If clients wish to relocate overseas, the family office may review immigration matters to identify potentially applicable tax residency statuses.
Another role that family offices are increasingly playing is to consolidate filings under Common Filing Rules for businesses.
The Common Reporting Standard (CRS) is an information standard for the automatic exchange of tax and financial information globally, designed to combat tax issues. Our partner tax advisors will explain to your family the different tax exemption schemes and requirements, helping them understand how to legally maximize their tax benefits. After considering your family's needs, we can advise on a suitable family office structure. We collaborate with major banks, leading law firms, and tax advisory services in Singapore to provide our clients with the best and most comprehensive advice.
What assets will you inject into the family office?
You can inject multiple categories of assets into a family office, including financial investments and even private or publicly traded companies.
Assets can also include real estate, and the issues that often arise in this area are whether the jurisdiction where the property is located levies inheritance tax and transfer tax, and whether there are other holding restrictions.
Some of our clients own valuable items such as private jets, yachts, rare works of art, gems and precious metals, and family heirlooms.
Careful consideration is crucial before deciding which specific assets to inject, as the characteristics, location, and other details of the assets can influence the tax and legal advice that lawyers provide to clients regarding the relevant jurisdictions, thereby affecting the assessment of the best asset transfer method.
We will review with our clients the assets that are acceptable to the bank and discuss investment strategy options.
For example, we might recommend alternative structures for assets that are not accepted by banks, such as operating the business through a private trust company.
What investment strategies and investment mandates does the family office have?
First, we need to understand the client's investment goals and risk tolerance. Then, we determine the amount of personal assets that will be used for investment. After understanding these details, we will recommend investment strategies and products that match the client's risk tolerance and goals.
Regarding applications to the Monetary Authority of Singapore and the Economic Development Board, regulators expect family offices to develop clear roadmaps for investment strategies and business investment mandates as part of the assessment process.
How do I apply to the Monetary Authority of Singapore for a license and tax exemption?
When a business is established as a single-family office, the family office structure will include different holding companies. If the business plans to apply for a tax exemption under the Enhanced Tier Fund Tax Exemption Scheme (commonly known as Section 13U), it will need to meet the relevant requirements.
For example, the office would need to hire at least three investment professionals, at least one of whom must be a non-family member, invest at least S$50 million in fund entities, and have at least 10% of its assets under management or S$10 million (whichever is lower) invested in the local market.
The business representative for this transaction needs to attend an interview with the Monetary Authority of Singapore (MAS), and we will coordinate and prepare for this for the client. The MAS wants to understand the investment strategy and other details of the transaction before granting approval for the tax exemption under Section 13X.
Section 13X exemptions allow certain income from designated investments to be exempt from taxation. Designated investments include a wide range of assets, such as stocks, shares, securities, and derivatives.
What conditions are required for continued operation?
To set up a family office, the first step is to decide on the location of the family office where the business will operate. Other administrative matters include opening the necessary bank accounts and implementing information technology systems to integrate the investment portfolio. We will also prepare annual tax returns and other mandatory filings, such as those required by the Common Filing Rules and the Foreign Account Tax Compliance Act.
In addition, we will assist clients in appointing external auditors to conduct annual financial audits and continuously review investment strategies with them.
Succession planning tools worth considering
To ensure the sustainable operation of a family office, we need to establish family governance guidelines and a family constitution. This process helps avoid disputes or infighting among founders when it comes to succession. We also need to define the succession of ownership within the family office.
Available tools include wills, enduring powers of attorney, and private trusts. Many clients want their children to be well-versed in business operations and investment management by the time they grow up. Therefore, we provide training for the next generation to help them gain a deeper understanding of family business and wealth management.
What are the family's philanthropic strategies?
In recent years, an increasing number of family offices have incorporated philanthropic elements. Offices may consider establishing charitable trusts to donate to specific charities. Setting philanthropic goals is a good practice, clarifying which specific philanthropic areas the family wishes to focus on. Additionally, we can introduce the family to a network of philanthropic partners and assist in arranging meetings aimed at achieving philanthropic goals.
