MAS Updates to S130 and S13U Applications for Family Offices

The Monetary Authority of Singapore (“MAS”) has introduced stricter criteria for funds to be eligible for the tax incentives available under S13O and S13U (formerly known as S13R and 13X) of the Income Tax Act 1947 (“ITA”). This would undoubtedly affect fund vehicles being managed by Single Family offices (“SFOs”).

The changes came into force on 18 April 2022. However, SFOs already awarded the schemes  or those with applications already underway will not be subject to the new regime. Summarily the changes will be as follows: –

1. Changes to the s13O application criteria are
   1. The fund has a minimum fund size of S$10 million at the point of application; and commits to increasing its AUM to S$20 million within a 2- year grace period. Previously, no minimum AUM applied.
   2. The fund is managed or advised directly throughout each basis period relating to any year of assessment by a family office in Singapore, where the family office employs at least two Ips. In the event that the family office is unable to employ two IPs by the point of application, the fund would be given a one-year grace period to employ the second IP. Previously there was no minimum employees required.
   3. The fund will incur at least S$200,000 in total business spending in each basis period relating to any year of assessment, subject to tiered business spending framework
   4. The fund managed by the family office will invest at least 10% of its AUM or S$10 million, whichever is lower, in local investments at any one point in time. In the event that the fund is unable to invest at least 10% of its AUM or S$10 million, whichever is lower, in local investments by the point of application, the fund would be given a one-year grace period to do so

2. Changes to the s13U application criteria are
   1. The fund has a minimum fund size of S$50 million at the point of application. This remains unchanged.
   2. The fund is managed or advised directly throughout each basis period relating to any year of assessment by a family office in Singapore, where the family office employs at least three IPs4 with at least one IP being a nonfamily member; and in the event that the family office is unable to employ one non-family member as an IP, the fund would be given a one-year grace period to do so. Previously, there ws no non-family member requirement.
   3. The fund will incur at least S$500,000 (previously S$200,000) in local business spending in each basis period relating to any year of assessment, subject to tiered business spending framework
   4. The fund managed by the family office will invest at least 10% of its AUM or S$10 million, whichever is lower, in local investments at any one point in time. In the event that the fund is unable to invest at least 10% of its AUM or S$10 million, whichever is lower, in local investments by the point of application, the fund would be given a one-year grace period to do so

For avoidance of doubt, local investments referred to in items “d” for both s13O and s13U include equities listed on Singapore-licensed exchanges; qualifying debt securities; funds distributed by Singapore-licensed/registered fund managers; private equity investments into non-listed Singapore-incorporated companies with operating business(es) in Singapore

Put simply, the requirements are becoming more stringent for applicants to avail themselves of the two tax incentive schemes. Please contact us for further information on how your plans for establishing an SFO may be impacted.