AI Summary
Sections 13O and 13U provide tax incentives for qualifying single family office fund structures in Singapore, subject to specific requirements. Key considerations include minimum assets under management, investment professional headcount, business spending, capital deployment, and ongoing compliance. Choosing between the two schemes requires families to consider their fund structure, investment strategy and long-term wealth objectives.
Singapore has developed into a significant centre for families seeking to manage private wealth, investments, and succession from a stable Asian financial hub. For an ultra-high-net-worth family considering a single family office (SFO), however, establishing a Singapore entity is only one part of the process. The family must determine how its investment assets will be held and managed, whether the proposed structure falls within Singapore’s regulatory framework, and whether it intends to apply for one of the available fund tax incentive schemes.
Sections 13O and 13U of Singapore’s Income Tax Act 1947 are central to many of these discussions. They provide tax exemptions for specified income from designated investments where the relevant conditions are satisfied. At Sim Mong Teck & Partners (SMTP), we advise families on establishing and structuring SFOs, including applications for and compliance with the relevant tax exemption schemes. A single family office lawyer involved in a family’s wider wealth and succession planning can also help ensure that decisions concerning the SFO are considered alongside trusts, wills, governance, and intergenerational objectives.
The two incentives have similarities, but they are not interchangeable. Understanding their different thresholds, structural requirements, and continuing conditions is important before deciding how a Singapore family office should be established.
Key Takeaways
- Sections 13O and 13U are fund tax incentive schemes rather than automatic tax exemptions for every Singapore family office, and the applicable conditions must be satisfied for the relevant exemption to apply.
- Under current SFO requirements, a Section 13O structure requires at least S$20 million in assets under management, while Section 13U requires at least S$50 million.
- The employment requirements also differ, with at least two investment professionals required under Section 13O and three under Section 13U, subject to the applicable conditions.
- Both schemes currently include tiered business spending requirements and a capital deployment requirement designed to create greater economic substance and investment activity in Singapore.
- Obtaining approval is not the end of the process, because an SFO must continue to monitor the relevant conditions and complete ongoing regulatory and reporting obligations after establishment.
What Is a Single Family Office in Singapore?
A single family office is generally established to manage the wealth and affairs of one family. Its precise mandate can differ significantly from one family to another.
Investment management may be its central function, but an SFO can form part of a much broader structure involving succession planning, philanthropy, family governance, and administration.
Singapore’s Economic Development Board recommends that families begin by determining the SFO’s mandate. This can include objectives such as wealth preservation, diversification, tax certainty, succession planning, and philanthropy. The appropriate legal and operational structure can then be developed around those objectives.
In practice, it is also useful to distinguish between the family office entity and the fund vehicle.
The family office typically provides investment management and related services, while family investment assets may be held separately through one or more fund vehicles. Depending on the family’s circumstances and objectives, trusts or other ownership structures may sit above or alongside these entities.
This separation becomes particularly important when considering Sections 13O and 13U because the tax exemption relates to qualifying income of the relevant fund structure, not simply to the existence of an SFO.
How Sections 13O and 13U Work
Sections 13O and 13U of the Income Tax Act 1947 provide tax exemptions for qualifying fund structures managed by Singapore-based fund managers, including qualifying SFO arrangements.
The exemption concerns specified income derived from designated investments, subject to the conditions of the relevant scheme.
This distinction matters.
Approval under Section 13O or 13U should not be interpreted as making every type of income earned by the family or family office tax-free. The statutory and regulatory framework defines the scope of the exemption, and the fund’s investments and income need to be considered accordingly.
For SFOs seeking these incentives, Singapore’s current setup framework identifies several requirements involving:
- Assets under management;
- Investment professionals;
- Business spending;
- Capital deployment; and
- The structure and management of the fund.
MAS approval is part of the application process for SFOs seeking the incentives. Singapore EDB currently indicates that applicants can generally expect an application outcome from MAS within approximately three months.
That is an indicative processing period rather than a guarantee for every application.
Section 13O: The Onshore Fund Tax Exemption Scheme
Section 13O is commonly referred to as the Onshore Fund Tax Exemption Scheme or resident fund scheme.
Under the current SFO framework, the fund must have at least S$20 million in assets under management.
The SFO must also employ at least two investment professionals.
For families considering this route, the S$20 million threshold should not be treated simply as an incorporation requirement. The investment portfolio, staffing model, spending, and capital deployment strategy all need to support the SFO’s ability to meet the applicable conditions.
The structure of the fund itself is also important. Section 13O applies to a company incorporated and resident in Singapore, distinguishing it from the greater flexibility available under Section 13U.
For a family that wants its investment vehicle anchored in Singapore, this can fit naturally within the broader SFO structure. However, the choice should be based on the family’s objectives rather than simply selecting the scheme with the lower AUM threshold.
Section 13U: The Enhanced-Tier Fund Tax Exemption Scheme
Section 13U is generally known as the Enhanced-Tier Fund Tax Exemption Scheme.
For SFO applicants, the current minimum AUM requirement is S$50 million, compared with S$20 million under Section 13O.
The employment requirement is also higher. At least three investment professionals are required.
Section 13U can accommodate a wider range of fund forms and does not impose the same Singapore-incorporated-company requirement as Section 13O. This structural flexibility can be relevant for families whose investment arrangements already involve trusts, corporate vehicles or other structures.
However, flexibility should not be confused with fewer compliance obligations.
The fund must still satisfy the applicable Section 13U conditions for the exemption to apply, and its structure should be assessed carefully before an application is made.
Comparing Sections 13O and 13U for an SFO
The following comparison focuses on some of the principal features families need to consider under the current SFO framework.
| Requirement | Section 13O | Section 13U |
| Common description | Onshore Fund Tax Exemption Scheme | Enhanced-Tier Fund Tax Exemption Scheme |
| Minimum AUM for SFO framework | S$20 million | S$50 million |
| Investment professionals | At least 2 | At least 3 |
| Fund form | Singapore-incorporated and resident company | Greater flexibility in the form and tax residence of the fund |
| Business spending | Tiered spending requirement, including the applicable minimum local business spending | Tiered spending requirement, including the applicable minimum local business spending |
| Capital deployment | Lower of S$10 million or 10% of AUM in specified qualifying investments | Lower of S$10 million or 10% of AUM in specified qualifying investments |
| MAS approval for SFO incentive application | Required | Required |
| Primary consideration | May suit a qualifying Singapore-based fund structure meeting the lower AUM threshold | May suit larger structures requiring greater flexibility in fund form |
The table provides a starting point rather than a decision rule. The fact that a family has more than S$50 million in AUM does not by itself mean Section 13U is automatically preferable to Section 13O.
The existing structure of the assets, investment strategy, family objectives and anticipated future growth should also be considered.
The Investment Professional Requirement Needs Real Planning
Headcount can be one of the more practical challenges when establishing an SFO.
Singapore’s current framework requires two investment professionals for Section 13O and three for Section 13U. This means families need to consider staffing early rather than viewing recruitment as something that can be completed after the tax incentive application.
The investment professionals need to perform genuine investment management functions within the SFO structure.
The issue can also intersect with Singapore’s employment pass framework, where foreign professionals are hired. A candidate’s ability to satisfy the SFO’s staffing needs does not automatically mean that the individual qualifies for an Employment Pass. Work pass requirements are administered separately by the Ministry of Manpower.
This distinction becomes important when families develop their timelines.
An SFO may have a preferred investment professional in mind, but the family still needs to account for recruitment, immigration requirements where relevant, employment arrangements, and the continuing ability to maintain the required investment team.
SMTP has itself highlighted the practical importance of Employment Pass renewals for investment professionals in SFOs, particularly because the relevant headcount needs to be maintained for the Section 13O or 13U conditions.
Business Spending Creates Economic Substance in Singapore
The SFO incentives are not designed around AUM alone.
Under the current framework, Sections 13O and 13U are subject to a tiered business spending requirement, with a minimum level of local business spending.
Singapore EDB’s current SFO guide identifies a minimum of S$200,000 in local business spending, with the applicable spending requirement increasing under the tiered framework.
This requirement encourages SFOs to establish genuine economic activity around their Singapore operations.
Depending on the structure and applicable rules, business expenditures may arise from activities such as professional services, investment administration, and other operational costs. Families should confirm which expenses qualify towards the relevant spending requirement rather than assuming that every cost incurred by an SFO will count.
The practical lesson is that the operating budget should be modelled before the family commits to a structure.
An SFO that satisfies the AUM requirement but has not planned for its annual operating and compliance costs may find that maintaining the incentive is more demanding than expected.
Capital Must Also Be Deployed into Qualifying Investments
Both Section 13O and Section 13U SFO applicants currently face a capital deployment requirement.
The fund must invest the lower of S$10 million or 10% of its AUM in specified categories of investments.
Singapore EDB currently identifies these categories as including:
- Equities, REITs, business trusts or ETFs listed on MAS-approved exchanges;
- Qualifying debt securities;
- Non-listed funds distributed by licensed financial institutions in Singapore;
- Investments into non-listed Singapore operating companies;
- Qualifying climate-related investments; and
- Qualifying blended finance structures supporting sustainable development with substantial Singapore involvement.
This requirement can materially affect portfolio construction.
Consider a Section 13O fund with exactly S$20 million in AUM. Ten per cent of the fund’s AUM is S$2 million, which is lower than S$10 million. The relevant capital deployment amount would therefore be S$2 million.
For a fund with S$150 million in AUM, 10% would be S$15 million. Because the requirement uses the lower amount, the relevant threshold would instead be S$10 million.
Families should therefore incorporate the requirement into their investment strategy from the outset rather than treating it as an administrative calculation after the portfolio has already been constructed.
Regulatory Status Is Separate from the Tax Incentive
Another important distinction concerns MAS licensing.
A family should not assume that receiving or applying for a Section 13O or 13U incentive determines whether the SFO requires a fund management licence. Tax treatment and regulatory status are separate questions.
Singapore EDB’s current SFO setup guidance states that SFOs managing primarily family monies are typically exempted from licensing by MAS. Such SFOs may operate under the relevant licensing exemption framework by filing a Notice of Commencement of Business within 14 days of commencing business and submitting annual returns thereafter.
The precise regulatory position, nevertheless, depends on what the family office actually does, whose assets it manages, and how its activities are structured.
This is particularly important if an office begins to manage assets beyond the relevant family or expands its services over time. The assumptions supporting its original regulatory treatment may need to be reconsidered.
Regulatory analysis should therefore occur before operations commence, not after the structure has already begun managing investments.
Approval Is the Beginning of Ongoing Compliance
One of the easiest mistakes to make is to treat the MAS approval letter as the end of the Section 13O or 13U process.
In reality, the SFO needs systems capable of monitoring compliance after approval.
This may involve maintaining:
- The required AUM;
- The required number of investment professionals;
- The applicable business spending;
- The required capital deployment;
- Records supporting the nature of investments and income;
- The fund’s approved structure and investment strategy; and
- The relevant annual declarations and regulatory filings.
IRAS’s current guidance concerning GST remission for qualifying funds illustrates the importance of this continuing compliance. For funds under Sections 13O and 13U, IRAS identifies the MAS approval letter and annual declarations submitted to MAS among the supporting documentation relevant to the GST remission framework.
The tax incentive should therefore be treated as a continuing compliance framework rather than a one-time approval.
Families should decide who is responsible for monitoring each requirement and establish appropriate records from the beginning.
Choosing Between 13O and 13U Requires More Than Comparing AUM
The S$20 million and S$50 million thresholds make it tempting to frame the choice as a simple question of family wealth.
That approach is too narrow.
A family deciding between the two structures should also consider:
- Where the fund should be established: Section 13O requires the relevant Singapore-incorporated and resident fund structure, while Section 13U provides greater flexibility.
- How large the investment team should be: Maintaining two investment professionals may suit one family, while another already has the scale and operating model to support three or more.
- How the portfolio is expected to develop: A family should consider not only current AUM but also future investments, liquidity events, and potential restructuring.
- How the SFO fits into succession planning: The fund vehicle may form only one part of a wider structure involving trusts, holding companies, wills, and family governance.
- How compliance will be administered: The SFO needs sufficient systems and professional support to monitor conditions after approval.
These considerations explain why SFO planning should begin with the family’s objectives rather than the tax exemption itself.
Setting Up an SFO That Works Beyond the Tax Incentive
Sections 13O and 13U can be important components of a Singapore SFO structure, but neither should become the sole reason for creating a family office.
An SFO may ultimately need to serve a family for decades. Its structure should therefore remain workable through changes in investment strategy, leadership, family membership, and succession.
At Sim Mong Teck & Partners, we advise families on the establishment and structuring of single family offices, applications for and compliance with Sections 13O and 13U, regulatory requirements, immigration and residency planning, and related wealth and succession structures. Our work can also include trusts, family constitutions, and other arrangements designed to support intergenerational wealth planning.
If your family is considering establishing an SFO in Singapore, speak with our team about how the proposed fund structure, tax incentive requirements, and wider family objectives can be considered together before implementation.
Frequently Asked Questions
Does an SFO need to open a bank account in Singapore?
Singapore EDB’s current setup guidance states that an SFO and its fund vehicle or vehicles should open and maintain an account with a MAS-licensed bank. Where an SFO uses a foreign-incorporated fund vehicle, the fund vehicle may instead maintain an account with a regulated bank in a jurisdiction meeting the specified anti-money laundering and countering financing of terrorism standards.
Can a Variable Capital Company be used with Sections 13O or 13U?
Potentially. IRAS’s current tax framework for Variable Capital Companies provides that VCCs may be considered for the Section 13O and Section 13U incentives, subject to the applicable conditions. Whether a VCC is appropriate for a particular family office requires separate structural analysis.
Is Section 13O or 13U the same as the Global Investor Programme?
No. The Global Investor Programme is a separate scheme administered by Singapore EDB that provides a route to Singapore Permanent Residence for eligible global investors. Option C of the GIP involves establishing a Singapore-based SFO with its own AUM and investment requirements. A Section 13O or 13U tax incentive should not be confused with GIP eligibility or approval.
Can an SFO change its investment strategy after receiving 13O or 13U approval?
Families should not assume that a material change can be made without considering the terms of the MAS approval. Published materials concerning the incentive framework indicate restrictions relating to changes in an approved investment strategy. The approval letter and prevailing MAS requirements should therefore be reviewed before implementing a material change.
Does qualifying for Section 13O or 13U mean an SFO does not have to consider GST?
No. Income tax exemption and GST are separate issues. IRAS maintains a specific GST remission framework for qualifying funds, including funds under Sections 13O and 13U, with its own eligibility and documentation requirements. The GST treatment of the SFO and fund should therefore be assessed separately.
