Singapore is a leading Asian hub for fund management. Singapore also has a vibrant and diversified base of over 700 asset/ fund managers. This 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 here.
As Singapore aims to be an Asian hub for fund management and domiciliation, MAS is leveraging on 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 the attractive tax framework and incentives for funds and fund’s 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 the 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 which could eliminate the tax liabilities subject to meeting certain conditions.
Tax incentive schemes in Singapore for funds
All fund management companies are required to be 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 exclusion 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
13R – Onshore (Singapore Resident Company) Fund Tax Exemption Scheme
13X – Enhanced Tier Fund Tax Exemption Scheme
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)
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).
Singapore-based and holding a CMS licence or expressly exempted from holding a CMS licence or as otherwise approved by the Minister.
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.
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.
|Income Tax Filing||
|Annual tax returns to IRAS|
Financial Sector Initiative – Fund Management (FSI – FM) scheme
Additionally, 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 manager must hold a CMS license (or been 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 will Argus help?
Argus, with our team of experienced professionals, can help you in setting up your fund management company and help you manage your regulatory compliances, 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 the extensive knowledge, diverse experience and skills to assist you with all your needs.