37 Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s required to obtain a licence from the MAS to conduct regulated fund management activities in Singapore. There are two selfinvoking licence exemptions whereby the FMC either manages a fund that invests solely in immovable assets, such as real estate and infrastructure funds; or provides fund management services to related corporations, such as members of the same group of companies. The second exemption is typically utilised by single-family offices (SFOs). If the requirements for exemption are not met, the FMC would have to apply for a licence with the MAS. They may apply for a Capital Market Services licence, where one key feature is the unlimited assets under management (AUM) (typically for mutual fund/hedge fund managers) or register with the MAS as a Registered Fund Management Company (typically for those who manage smaller funds). Next, Singapore offers tax incentives such as the Section 13U (Enhanced-Tier Fund Tax Incentive Scheme) and Section 13O (Singapore Resident Fund Scheme) schemes, which provide for tax exemptions on certain income or gains derived by the funds. One key condition of note is that the fund must be managed by a licensed (or exempted) fund manager in Singapore. Furthermore, FMCs may be eligible for a concessionary tax rate of 10% under the Financial Sector Incentive–Fund Management (FSI-FM) scheme. This is for fund management companies which manage only incentivised funds and commit to, amongst other things, growing their businesses (such as through AUM or headcount) in Singapore over a specified period. Are there any specific rules governing the taxation of carried interest in Singapore? No. In the absence of any deeming provisions in Singapore, the tax treatment of carried interest would prima facie follow its legal form. For funds managed in Singapore, it is common for carried interest to be structured as investment returns and paid out as dividends or partnership distributions if the carried interest recipients have invested a meaningful amount of capital to show alignment of interest with investors. Whilst less common, carried interest is sometimes structured as a performance fee payable to the FMC. In what way is Singapore a favourable location for setting up a family office and what are the types of structures available? Apart from the key benefits mentioned earlier, Singapore operates in a time zone which allows for greater convenience and ease of communication when servicing clients in Asia. The multi-racial society also means multilingual capabilities. Singapore has a good reputation and infrastructure with an unbiased, fair court and legal system, a strong regulatory framework and a stable political environment. The structures typically used by Singapore SFOs include private limited companies, VCCs and/ or trusts. These allow flexibility and enable effortless assimilation into various categories of wealth planning structures. What about someone who desires to set up a multi-family office (MFO) in Singapore? How is it different from setting up an SFO in Singapore? One key difference lies in the licensing requirements. MFOs require an MAS licence to conduct fund management activities, while SFOs typically qualify for licensing exemption. A huge limiting factor for time-sensitive investments by MFOs lies with the approval process of the licence, which may take up to 9 months. Furthermore, FMCs may qualify for the FSI-FM scheme, subject to conditions met. The intention of this is to incentivise fund managers to grow their AUM/fund management activities in Singapore. This scheme ismore targeted towardsMFOs since SFOs’ main objective is generally to grow and preserve family wealth. However, the MAS is prepared to approve FSI-FM applications made by SFOs on a case-by-case basis and if conditions are met.
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