I. New rules for family offices in Singapore

On April 11, 2022, the Singapore Financial Regulatory Authority announced that funds directly managed by the family office were in line with the updated provisions of the tax exemption scheme under articles 13O and 13U.

Under the new rules, the investment threshold is raised, and the minimum asset management size of funds under the 13O plan is S $10 million, which will be increased to S $20 million within two years. Previously, the Singapore Monetary Authority had no minimum asset management requirement for the 13O plan, while the threshold for the 13U plan was S $50 million.

The new rules came into effect on April 18.

II. General situation and common structure of household offices in Singapore

The Singapore family office generally consists of two companies, one is a fund company, which holds a variety of family-owned assets, and the other is a fund management company (also known as a single family office), which provides fund management services to fund companies.

Fund companies can apply for tax exemption schemes in Singapore's income tax Act of 1947, that is, 13O plan and 13U plan, while fund management companies can employ family members and local professional investors as investment managers based on the need to manage family wealth, and the applicant may act as a director of a fund management company. Eligible family members can act as investment managers and then apply for a Singapore work permit (EP) and go to Singapore for investment management work. At the same time, family members of EP holders, including spouses, unmarried children under the age of 21 and parents, can obtain Singapore visas by applying for DP and LTVP. Family offices in Singapore have attracted the attention of wealthy people around the world because of their advantages in wealth management, tax breaks and identity planning.

The common structure of Singapore Home Office is as follows:

Note: under the 13O plan, the fund company can only be a registered company in Singapore, while under the 13U plan, the fund company can be a variety of entities (Singapore or offshore companies, trusts and limited partnerships). See [Singapore Home Office FAQ Q1] for more information on the advantages of family trust with family structure.

III. An analysis of the specific provisions of the new regulations of the Singapore Home Affairs Office.

The new regulation adjustment of Singapore Household Office mainly involves four aspects: the minimum scale of asset management, local investment, the number of professional investors and total business expenditure.

1. Minimum asset management scale

Under the new rules, the threshold for 13O investment is raised, and the minimum asset management size of the fund is S $10 million, and applicants are required to promise to increase to S $20 million within two years. Previously, the Singapore Monetary Authority did not have a clear minimum asset management requirement for the 13O plan, but recommended at least S $5 million.

The threshold for the 13U plan is S $50 million.

two。 Local investment

The Singapore Monetary Authority requires home-run fund companies to invest at least 10 per cent of their assets under management or S $10 million, whichever is the less, in "local investments" in Singapore at any time. If the applicant fails to meet this condition at the time of application, the fund company will have an one-year grace period to meet this condition.

13U, like the 13O policy, must meet the minimum conditions for "local investment".

The Singapore HKMA also has clear rules on what is meant by "local investment", including the following types:

3. Number of professional investors

Under the new rules, there will be at least two professional investors in the 13O program, and if the home office is unable to hire two professional investors at the time of application, it will be given a grace period of one year to hire a second professional investor. The original policy was to hire at least one professional investor.

Under the new rules, the 13U plan requires the employment of at least three professional investors, of which at least one professional investor is a non-family member. If the home office is unable to hire a non-family member as a professional investor at the time of application, there will be an one-year grace period to meet this requirement, while the original policy does not require non-family members to hire.

4. Graded total annual business expenditure

Under the new regulations, under the 13O and 13U plans, the Singapore Home Office meets tiered business expenditure standards based on the size of assets under management. Under the new regulations, the minimum total operating expenditure standard for 13O plan is S $200000, and the minimum total operating expenditure standard for 13U plan is 500000. Under the original policy, the total operating expenditure for 13O and 13U was S $200000 and was not affected by the size of asset management.

IV. Frequently asked questions and answers by Singapore Home Office

Q1. Is it necessary to set up a family trust when setting up the Singapore Home Office?

When setting up a family office in Singapore, it is not necessary to set up a family trust, but considering the advantages of family trust in wealth inheritance, risk isolation, privacy protection and so on, Fu Tu Trust Director Ma Yunyu suggested that the upper structure of the fund entity should be set as a family trust to avoid individual shareholding as far as possible.

The private wealth team of law firm Luo Xiaxin also suggests that if clients have special needs, they can also consider setting up a family trust while setting up a family trust, such as what the applicant needs:

Preserve family wealth for future generations-trusts can help founders retain property for the benefit of future generations and reduce the dispersion of family wealth

Protect family members-trusts ensure that trust assets are protected so that they can be provided to families in need

Consolidation of assets-trusts help founders consolidate their assets into one entity

Avoid probate-because the legal ownership of the trust assets belongs to the trustee, the trust assets will not be part of the property of the founder and no probate procedure will be required, thus avoiding delay and inconvenience

Confidentiality-a trust deed is a private document entered into between the founder and the trustee and the trust instrument usually does not need to be registered

Flexibility-trusts usually allow the trustee to handle flexibly the investment, management and distribution of trust assets in the event of changing circumstances

Reasonable tax planning-in some cases, after careful planning, the trust can reasonably optimize the tax burden; or

Asset protection-sometimes the use of trusts can help protect trust assets in some cases, such as the beneficiary's divorce or the beneficiary's creditor claim.

Family trust can refer to the following structure:

Q2. If the asset management scale of the applicant exceeds S $50 million, choose the 13O plan or 13U plan?

The private wealth team of law firm Luo Xiaxin suggested that applicants should not choose 13O or 13U tax incentive plans based on the size of the fund, but should consider the nature of their funds. and whether the fund can meet the threshold requirements of the corresponding tax incentive scheme. For example, 13O has restrictions on the legal entity of the fund, which must be a Singapore registered company. On the contrary, 13U is more flexible, with no restrictions on the legal entities of the Fund and no restrictions on the jurisdiction of the Fund.

If applicants need a more flexible structure for a variety of reasons (such as large families, diversified assets, etc.), they should consider applying for a 13U plan. However, if the applicant needs, has a simple background and tends to have a Singapore-centric structure, the applicant should consider applying for the 13O scheme.

If the management scale of a fund exceeds S $50 million, the applicant initially meets the threshold requirement of 13U for the size of the fund, and may choose to apply for 13U and enjoy the more flexible benefits of 13U. In addition, if the client already holds assets through an entity outside Singapore, in order to avoid the need for asset transfer, the applicant is advised to apply for a 13U tax exemption scheme.

However, applicants must note that in addition to the threshold requirements for the size of the fund, the other requirements of 13U will also be higher than that of 13O. For example, the annual business expenditure of 13U is higher than 13O, and family offices must employ more investment professionals than 13O.

Q3. Which subject has applied to the HKMA for licence exemption? Singapore home management company or fund holding entity?

In the most basic structure of the Singapore Home Office, two companies need to be set up, one is a fund company to hold all kinds of assets held by the family, and the other is a fund management company to provide fund management services to fund companies.

Since a single family office manages its own family assets, not others' assets, the Singapore Monetary Authority does not intend to permit and regulate a single family office, so in the process of setting up a single family office, you can apply to the Singapore Monetary Authority for exemption from holding a fund licence.

Q4. When does the tax exemption of the home-run fund come into effect?

According to the regulations of the Singapore Monetary Authority, the official effective time of the tax exemption for the home-run fund shall be based on the date of the formal submission of the application materials. for example, if the applicant formally submitted the application materials on April 20, the HKMA promised to reply within 12 weeks. If the HKMA gives a reply in July, the fund tax exemption will officially take effect on April 20.

Q5. If Singapore fund companies hold encrypted currencies, can they be regarded as tax-free "designated investments"? Can it be included in the size of assets under management?

The private wealth team of law firm Rorschach pointed out that under current Singapore law, the authorities have not yet determined what type of investment / financial assets cryptocurrencies are, so cryptocurrencies cannot be regarded as tax-free "designated investments" and cannot be included in the size of assets under management.

Q6. What is the annual business expenditure?

The private wealth team of law firm Luo Xiaxin points out that annual business expenses refer to the operating costs incurred by an enterprise in the course of doing business, such as (I) company secretarial expenses, (ii) accounting fees, etc. Annual operating expenses must be met by the fund. The fund management fee is the fund paid to the household, and the fund management fee is the income and expenditure of the fund.

In addition, in the operation of the whole structure, there are many hidden costs to consider. For the family, it is necessary to carry out reasonable planning as a whole. It is necessary to realize the low-cost operation of family office projects and meet the requirements of minimum business expenses. Without allowing hidden costs to generate other excessively high taxes.

What can Futu Trust do for its clients?

The single family office project in Singapore is an important way for high net worth individuals to realize family wealth management and inheritance, and the whole process involves many links. including bank account opening, trust structure construction, company secretarial services, application for tax concessions and license exemption, investment and so on, is a systematic task, which requires overall planning of the wealth and inheritance of high net worth individuals and families. The whole process requires 4-5 professional and reliable partners to work together.

As a professional service provider of family trust and home-run services in Singapore, Futu Trust works with professional lawyers, tax consultants and other partners, on the basis of a comprehensive understanding of customer needs, to assist clients in the construction of trust and household structure, company secretarial services, etc., but also can combine the advantages of Futu Group in investment trading platform, wealth planning and management to provide customers with an overall and comprehensive plan. Committed to become a reliable communication window for customers, save customer communication costs, and efficiently meet the needs of customers and families.

Futu Trust Co., Ltd. and Futu Trustee (Singapore) Pte. Ltd. It is wholly owned by Futu Holdings Limited Limited (NASDAQ: FUTU). Forto Trust Limited is a licensed trust or corporate service provider (licence number: TC006475) registered under the Hong Kong Anti-money laundering and counter-Terrorism financing Ordinance (Cap. 615) and a trust company registered under the Hong Kong Trustee Ordinance (Cap. 29). Futu Trustee (Singapore) Pte. Ltd. Is a company licensed under the Singapore laws and regulations the Trust companies Act (Trust Companies Act) and has been granted a trust licence (licence number: TC000074) issued by the Monetary Authority of Singapore.

The trust teams of Fortune Hong Kong and Singapore bring together excellent experts from bank trusts, multinational trust service providers and family offices with rich experience in family trust and family office services. Up to now, Futu Trust has handled the trust consulting and landing services of more than 200 corporate and individual clients, with efficient response, and has been recognized by enterprises and high net worth individuals and families in various industries.

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Introduction by the team of experts

Ma Yunyu Pinky

Director of Futu Trust

Master of Law from the Chinese University of Hong Kong and Bachelor of Finance from City University of Hong Kong, TEP, Honorary member of the Global Association of Trust and Heritage Practitioners (STEP). Has worked in well-known independent trust companies, bank trusts and multi-family offices, providing family trust, corporate, identity, tax, banking, asset allocation and other wealth and inheritance planning for high net worth clients, and providing corporate and institutional clients with ESOP, fund and other business solutions.

Weng Shumin Rachel

Executive Director of Fortune Trust (Singapore)

ACCA Wenpin, UK, chartered accountant in Singapore, TEP, honorary member of the Global Association of Trust and Heritage Practitioners (STEP). Has worked in well-known independent trust companies, private banks, multi-family offices and accounting firms, providing corporate and high net worth clients with corporate and family structure planning, tax and financial management, including trust, fund, ESOP, insurance, etc.

Suzanne Johnston

Partner of Luo Xiaxin Law firm

Suzanne is a private wealth, trust and UK tax lawyer in the Singapore office of law firm Roxanne, with extensive experience in complex cross-jurisdiction trust and estate planning.

Wei Kang Kang Wei

Partner of Luo Xiaxin Law firm

Mr. Kang is a lawyer in private wealth and global heritage planning in the Hong Kong office of Law firm Luo Xiaxin. Lawyer Kang has extensive experience in complex family trusts involving multiple jurisdictions, tax consulting and compliance, and inheritance planning.

Yi Lee Li attainments

Luo Xiaxin Law firm registered overseas lawyer

Lawyer Li is good at trust and private wealth matters. Practice experience includes assisting high net worth individuals and families to set up complex trusts, family offices, and develop effective succession planning structures. Lawyer Li has been recognized by the Asia-Pacific legal Top 500 for his "ability to deal with clients".

Luo Xiaxin Law firm

Law firm Stephenson Harwood employs more than 1100 people worldwide, including more than 190 partners, and is committed to achieving business goals for clients, including public and private companies, institutions and individuals. Through the firm's alliance with leading independent firms in Singapore and mainland China, members of Luoxin Law firm can provide legal advice on the laws of Hong Kong, the people's Republic of China (mainland China), Canada, the United Kingdom and Singapore. For decades, the law firm Luo Xiaxin has handled legal affairs for private clients and their families. The firm has always understood that private clients need a wide range of services, far beyond those provided by traditional "private client" companies. This is because the firm's clients are usually corporate and have an international background, while often involving complex transnational interests. Luo Xiaxin's expertise includes: trust and estate planning, real estate, corporate succession planning, establishment and registration of charitable trusts and institutions, corporate administration, family trust disputes, private jets and yachts, Canadian tax and estate planning, Hong Kong taxation, Chinese taxation, ESG and sustainable business and philanthropy.