Singapore Tax Incentive Schemes for Fund and Fund Managers
Singapore tax incentive schemes are just some of the many reasons why the region has become a leading Asian hub for fund management. Singapore also has a vibrant and diversified base of over 700 fund managers which is supported by the experienced and deep domain knowledge of ancillary service providers. Many global fund houses have chosen Singapore as their regional hub, and anchored their portfolio management, trading and research there.
As Singapore aims to be an Asian hub for fund management and domiciliation, The Money Authority of Singapore (MAS) is leveraging its external fund management programme to anchor deeper asset management capabilities in Singapore. MAS is also working with the industry to position Singapore as a regional fund domiciliation hub through the Singapore Variable Capital Company framework. Singapore has also provided an attractive tax framework and incentives for funds and fund managers.
Singapore tax exposures for funds
Funds which are managed by a fund manager may be liable to tax in Singapore due to the activities of managing the investments of the fund. Income and gains derived by the fund may be considered as Singapore-sourced and liable to tax in Singapore depending upon the taxable presence in Singapore for the fund (onshore or offshore). However, Singapore has provided tax incentives that could eliminate the tax liabilities subject to meeting certain conditions.
Tax incentive schemes in Singapore for funds
All Singapore fund management companies are required to be licensed and registered with the MAS, therefore holding the title of being a Registered Fund Management Company (RFMC) or holding a Capital Market Services License (CMSL). This is also a requirement to qualify for the tax incentive schemes.
The specified income derived by a prescribed person from funds managed in Singapore by any fund manager in respect of “Designated investments” is exempt from tax. “Designated investments” are specified in Part A of the Third Schedule of regulations and include a wide spectrum of investments like stocks, shares of any company, bonds, notes, commercial papers, treasury bills, certificates of deposit, derivatives, liquidation claims and others. One of the main exclusions is immovable property in Singapore.
These tax incentives are outlined in section 13CA, 13R and 13X under the Singapore Income Tax Act.
- 13CA – Offshore Fund Tax Exemption: applies to funds not residing or incorporated in Singapore and does not require the approval of MAS.
- 13R – Onshore (Singapore Resident Company) Fund Tax Exemption Scheme: designed for funds that reside or are incorporated in Singapore and MAS approval is required for the exemption.
- 13X – Enhanced Tier Fund Tax Exemption Scheme: applies to both onshore and offshore funds and MAS approval is required for the exemption.
Key Features and Requirements for 13CA, 13R, and 13X Tax Exemption Schemes
A summary of the key features and requirements of each of the tax incentive schemes have been outlined in the table below:
| 13CA – Offshore Fund Tax Exemption | 13R – Onshore (Singapore Resident Company) Fund Tax Exemption Scheme | 13X – Enhanced Tier Fund Tax Exemption Scheme | |
|---|---|---|---|
| Fund’s Legal Form | Companies, trusts and individuals | Company incorporated in Singapore | Companies, trust (exceptions apply) and limited partnerships (no look-through) |
| Fund’s Residence | Non-tax resident of Singapore with no presence in Singapore (other than the Singapore fund manager and/or Singapore-based trustee if the fund is organised as a trust).
Must not be 100% beneficially owned, directly or indirectly, by Singapore investors (excluding another approved onshore fund holding 100% of the shares in the offshore fund). |
Must be tax resident of Singapore.
Onshore fund must not be 100% beneficially owned by Singapore investors (excluding another approved onshore fund holding 100% of the shares in the onshore fund). |
No restrictions |
| Fund Manager | Singapore-based and holding a CMS licence or expressly exempted from holding a CMS licence or as otherwise approved by the Minister. | ||
| Investor | Non-qualifying investors (i.e. Singapore non-individuals investing above a certain percentage in the fund) would need to pay a penalty to the Singapore tax authorities.
Cannot be 100% beneficially owned by Singapore Investors.5 |
No restrictions on Singapore investors. | |
| Assets Under Management (AUM) | No restrictions | Minimum of S$50 million (committed capital concession available for real estate, infrastructure and private equity funds). | |
| Fund Expenditure | No restrictions | At least S$200,000 business spending in a year. | At least S$200,000 local business spending in a year.
|
| Approval Requirement | No approval needed from MAS. | Approval required from MAS.
No change in investment strategy allowed after approval. |
|
| Reporting requirement | Annual Statements to investors.
Tax filing to the Inland Revenue of Singapore (IRAS) for Non-Qualifying investors. |
Annual Statements to investors.
Tax filing to IRAS for Non-Qualifying investors. |
Not required |
| Income Tax Filing | Not required | Annual tax returns to IRAS | |
Key Features and Requirements
A summary of the key features and requirements of each of the tax incentive schemes have been outlined in downloadable PDF.
Financial Sector Initiative – Fund Management (FSI – FM) scheme
The FSI – FM scheme is a Singapore tax incentive scheme offered by the government to encourage the growth and development of the fund management industry in Singapore.
Under the Financial Sector Initiative – Fund Management (FSI – FM) scheme, the fee income earned from carrying out the job as a fund manager is taxed at a reduced rate of 10% instead of the general income tax rate of 17% in Singapore. The general requirements to qualify for this scheme are as follows:
- Fund managers must be incorporated as a Singapore company or have a permanent establishment in Singapore
- Fund manager must hold a CMS license (or be given permission to be exempt from holding one).
- Fund manager must employ at least three experienced investment professionals each earning at least S$3,500 per month.
- Minimum Assets Under Management of S$250 million.
How can Waystone Compliance Solutions help?
Our team of experienced professionals, can help you in setting up your fund management company and help you manage your regulatory compliance, Singapore tax exposures and assist you to obtain various Singapore tax incentives. This includes working with relevant authorities like MAS, IRAS, ACRA. This will include the application for the appropriate Capital market services license or registration of the fund management company. Our dedicated regulatory compliance and tax experts’ team comes with extensive knowledge, diverse experience and skills to assist you with all your needs.
For more information on how Waystone Compliance Solutions can assist you with your APAC compliance needs, contact us today.