Setting Up a Family Office in Singapore

In today’s evolving tax landscape and the market uncertainty, wealthy individuals and families are prompted to review and reassess their succession and estate planning strategies. Their aim has always been to identify and choose a country that is politically and economically stable and safe to grow, manage and preserve their wealth for the long-term.  

The increased economic growth in Asia over the past several years has led to a tremendous upsurge in wealthy families from the Asia Pacific region. But that does not mean that these families only concentrate their wealth planning in Asia alone. Most high-net-worth (HNW) individuals have global businesses or investment presence in several countries and their family members may also be residing in different parts of the world. Whenever there are asset transfers across the globe or dealings with family members of different nationalities and tax residencies, legacy or succession planning becomes extremely complex. The laws and legislations of other jurisdictions would come into play and multi-jurisdictional tax reporting is involved as well.   

For the sophisticated and larger families, they realise the advantages of professionalising wealth management through a family office. A family office option allows families to establish clear family governance structures, hire qualified professionals to manage investment portfolios and ensure the desired investment objectives and strategies are met, develop robust processes to track performance, manage budgets and handle the necessary financial reporting. These key overall factors are essential in order to achieve a long-term and holistic approach to wealth preservation and wealth transfer to the next generation. 

What is a Family Office?

A family office is a professionalised private entity set up to manage the financial and non-financial affairs of a wealthy family. It serves as a centralised management system for preserving and growing family wealth across generations.  Family offices typically handle a wide range of responsibilities, from investment management and tax planning to philanthropy and lifestyle management according to specific wishes and needs of the families.

Family offices are structured either as a single-family office (SFO) or a multi-family office (MFO). A SFO is a dedicated company set up to serve and offer exclusive, customised services tailored to the sole family’s financial and non-financial needs. 

A MFO on the other hand is a company set up to serve multiple unrelated HNW family groups. The combined and larger asset pool creates the opportunity to utilise an expanded team of experts (e.g. wealth managers, financial advisers, investment managers, etc.) across various areas of wealth management. The pooling of resources from different families optimises investments and operational efficiencies.

In deciding which type of office to choose, families should consider their aggregate net worth, the complexities of their own financial needs and the desired level of personalised attention.    

Different Needs and Activities of a Family Office

Each family is unique and possesses different needs. For instance, the required services and needs of wealthy Asian family offices, whose wealth is largely built through first or second-generation entrepreneurships, would be very different from those well-established American or European family offices which have existed over a few generations and are already professionally managed. For these older family offices, if they desire to set up a further arm or office in this part of the world, it is likely to be for risk diversification reasons or to limit their taxes such as inheritance or estate taxes in the jurisdictions that they are currently operating in. 

Another difference we encounter lies in the areas of philanthropy and ESG (Environmental, Social and Governance) investments. The Americans and Europeans who have well-established family offices probably already have implemented programmes that reflect the family’s values and legacy. As for Asian families, charitable giving and contributions to causes are generally less structured.  That said, they are much more aware of ESG initiatives and investments nowadays, often influenced by their millennial and Gen Z children. We are now seeing more affluent Asian families institutionalising their charitable giving through their family office or the setup of formal structures such as a charitable foundation or trust.   

The setup of a family office not only streamlines operating and compliance costs but also reduces time-spent in the collation of information and extraction of key data from various sources or investment portfolio reports. Simply put, it brings about a myriad of benefits as opposed to challenges. Once a family office is up and running, it employs suitably qualified investment professionals to manage the family wealth and investments under one roof. This makes the tracking of investment performance, monitoring of market economic trends and rebalancing asset allocations more efficient and timelier. 

The establishment of a family office with a proper governance structure in place is also key as it helps to ensure transparency, effective management, efficient decision making and resolve any conflicts or disputes. This streamlined approach and the level of coordination and centralisation also facilitates the smooth transfer of wealth to the next generation.   

Before proceeding with the family office setup however, it is important to always ask the question of whether you really need a family office and to what extent the financial and non-financial activities are relevant and will be performed by the family office once it is set up. The expected size of the fund under management should also be ascertained to ensure that there is a certain level of sustainable income from a liquid portfolio to effectively fund the operation of the family office.   
 

Choosing a Suitable Jurisdiction for the Family Office Setup

Choosing where to set up a family office is not a one-size-fits-all decision. It involves balancing several factors including tax efficiency, political stability, regulatory environment and access to talents and services. A key consideration is the family’s long-term goals including asset protection, privacy and future generational planning. 

Tax efficiency is often a primary concern. Jurisdictions with favourable tax regimes for income, capital gains and inheritance can offer significant benefits. In addition, a country with an extensive tax treaty network is an advantage as taxpayers could potentially avoid having to pay tax in multiple jurisdictions. 

Political stability of the chosen country is equally important. The choice of a suitable jurisdiction would have to be one that ensures the family assets and operations are less likely to be affected by political or economic upheavals and provides a secure environment for long-term planning and investments.

Having a supportive legal and regulatory framework is also a crucial consideration. 
Another factor to bear in mind is access to talent and services. The availability of specialised professional services including legal, financial and investment expertise is essential. A jurisdiction with a robust infrastructure for financial services and a skilled workforce are certainly plus factors.  

The ultra-rich individuals are often driven by commercial considerations and other factors (e.g. public safety) rather than making a mere comparison of tax rates and lifestyle in choosing where they wish to reside as part of their longer-term migration strategy and the establishment of their family offices.   

Implications Arising from the Termination of UK non-Domiciled Tax Status

In the last quarter of 2024, the UK Government announced that the non-domiciled tax regime would be abolished, in addition to announcing other tax law changes impacting foreigners (non-UK citizens) residing in the UK. The ultra-rich foreign (non-UK citizens) residents had long enjoyed this sweet fiscal deal. The announced tax changes essentially shifted the UK taxation rules from domiciled-based to residence-based. It also means long-term UK residents, who are non-UK citizens, may potentially be exposed to high UK Inheritance Tax on their worldwide assets. 

This sets in motion the ultra-wealthy individuals’ reassessment of their domicile status, understanding the implications of the changes announced and determining whether the continued non-domiciled status remains advantageous to them or if they should seriously consider alternative strategies and leave the UK. 

From initial surveys carried out by the press, there are indications that non-domiciled residents in the UK might leave in droves within the next few years and they may well be heading to jurisdictions which offer favourable tax regimes or low-tax hubs like Singapore, Switzerland and United Arab Emirates (UAE) to help optimise tax efficiency.  

UAE is investing heavily in its efforts to attract wealthy individuals to migrate and settle in Dubai. HNW individuals however may not be totally convinced that UAE is the premier or safest country to park their wealth for a variety of reasons, such as unfamiliarity with its culture, business environment and the perceived geopolitical risk in that region. 

Many wealthy families still have a preference to keep their wealth in more established and safer-bet wealth hubs such as Singapore and Switzerland as both these countries hold gold standard in wealth management and have decades-long reputation for trust, stability and specialised expertise. These are precisely the factors that appeal to wealthy families focusing on intergenerational wealth preservation. Many wealthy individuals would have adopted diversification strategies in any event and believing in spreading their assets across multiple jurisdictions to mitigate risk.

Why Singapore is still the Preferred Choice for Family Office Setup

Singapore has gained an international repute and is regarded by many wealthy families as one of the world’s safest jurisdictions to park their wealth for growth, management and preservation as it has proven itself to be a politically and economically stable country. The small city-state has increasingly emerged as the preferred jurisdiction for family office setups. The number of family offices enjoying tax incentives granted by Monetary Authority of Singapore (MAS) has hit more than 2,000 by the end of 2024; a 43% increase from 1,400 offices from the year before.

Apart from the Asian families, Singapore also expects increased wealth flows from Europe and North America for the next few years following the termination of the UK non-domiciled tax status mentioned above. Global investors view the Asia-Pacific as a third safe haven, in addition to the established safe havens of Europe and North America, for portfolio diversification. This spells good news for service providers based in Singapore who usually have global geographical presence to allow them to serve family offices across multiple jurisdictions.

The following attractive attributes give Singapore an edge over other financial hubs as the jurisdiction of choice for the setup of family offices:

• Recognised as a reputable international financial hub and one of the world’s leading private banking and wealth management centres and offers a full suite of wealth management services.
• Has a well-developed infrastructure, robust legal and regulatory framework.
• Political and economic stability with a Government that is pro-business and forward-looking.
• Offers a competitive tax regime with relatively low corporate and personal income tax rates. There is no capital gains tax or withholding tax on dividends.
• Has attractive tax incentive schemes for family offices setups.
• Has no estate duty, inheritance or gift taxes.
• Has an extensive tax treaty network with about 100 countries worldwide which could potentially help avoid double taxation.
• Technically advanced, highly skilled and talented workforce.  
• Has a high standard of living and offers a high degree of public safety for its residents.
• Has a world class education and healthcare infrastructure. 

Tax Incentives Schemes for Single Family Office Setup in Singapore

Income of companies accruing in or derived from Singapore or foreign-source income received in Singapore is subject to corporate income tax at 17% currently, unless the income in question is specifically tax-exempted under the Singapore Income Tax Act. 

To strengthen Singapore’s position as a global wealth management and family office hub, favourable tax incentive schemes, the section 13O and section 13U schemes, administered by MAS, are offered for the setup of family offices in Singapore if the requisite conditions are met. 

With the accord of the tax incentive status, specified income derived by the funds managed by family offices from approved Designated Investments is tax-exempt in Singapore. Designated Investments include stocks and shares of qualifying companies, futures contracts held in futures exchanges, qualifying classes of debt securities and deposits held with financial institutions. 

For family offices which only manage the assets and funds of a single family with no third-party funds involved, there is no requirement to apply to MAS for a fund management licence. This is a plus point as it takes away the regulatory burden and reduces administrative hassles associated with the setup of a family office. 

Key features of section 13O and section 13U tax incentive schemes for single family offices setup in Singapore are summarised in the table below. 

Philanthropy Tax Incentive Scheme for Family Offices

MAS introduced the Philanthropy Tax Incentive Scheme in July 2023 with the aim to encourage greater philanthropic giving among single family offices operating in Singapore and the growth of philanthropic capabilities in the country.    

Under the Scheme, approved Qualifying Donors will be able to claim 100% tax deduction for their overseas donations made through qualifying local intermediaries for a period of five years. The tax deduction however is capped at 40% of the approved Qualifying Donor’s statutory income. 

Eligible applicants for the Scheme are single family offices who are managing a fund under section 13O or 13U. A Qualifying Donor can be the section 13O or 13U fund, the ultimate beneficial owner or a beneficiary of the fund or a related family business. 
 
Additional economic commitments (on top of existing commitments in relation to the section 13O or 13U award to the fund) that are required to be met by applicants are the appointment of a Philanthropy Professional, the employment of one additional local professional headcount and the incurrence of an additional S$200,000 in local business spending.    

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Whether it is for you, your family or your business, it is essential to take proactive steps to ensure your wealth is protected wherever it may be. If you have interests and family members across multiple jurisdictions, it creates additional complexities and increases the risk of non-compliance. 

The right support and advice are critical for your wealth planning in ensuring that your personal wealth goals and ambitions are achieved. We can support you throughout your wealth journey, understanding your needs and helping you to preserve your assets for generations to come.  If need be, we will coordinate your domestic and international requirements across different jurisdictions and provide you a borderless solution to meet your global requirements.