Trends and Developments in Singapore’s Private Wealth Sector

Singapore, with a highly skilled workforce, excellent international connectivity and a stable, efficient regulatory framework, is known to be a highly attractive business centre. Its pro-business environment, strong infrastructure, and strategic location, along with its well-developed financial system and tax incentives, make it a preferred location for businesses and regional headquarters of the world’s biggest firms in Southeast Asia.

Hong Kong has long been seen as a competing business and financial hub to Singapore. While Singapore’s corporate tax rate is 17% compared to Hong Kong’s 16.5%, the various tax incentive schemes in Singapore can lower the effective tax rate to 13.5% or less. However, as these tax incentive schemes have time limits, multinationals should weigh other factors when choosing a location.  

Singapore’s strong ties with both the US and China make it a ‘flight-to-safety’ destination for multinationals. Another key draw for Singapore is its political stability, which provides wealthy families and businesses with the certainty and confidence for long-term planning. 

Family Office Growth and Tax Incentives

Singapore’s tax incentives, including the Enhanced-Tier Fund Tax Incentive (S13U), the Resident Fund Scheme (S13O), and the Offshore Fund Exemption Scheme (13D), have fuelled the robust growth in the number of single-family offices (SFOs) established in Singapore over the last few years. This number has increased dramatically, exceeding 2000 by the end of 2024, from 400 in 2020.

While these schemes have been extended until 2029, their qualifying criteria have been tightened, requiring SFOs to meet stringent economic criteria. Since Tuesday, 1 October 2024, new applications for S13O and S13U must include a screening report from a service provider approved by the Monetary Authority of Singapore (MAS). 

To encourage SFOs to use Singapore as a base for their overseas donations, MAS also introduced the Philanthropy Tax Incentive Scheme (PTIS) in January 2024. The PTIS allows qualifying donors in Singapore to claim a 100% tax deduction, capped at 40% of the donor’s statutory income, for overseas donations made through qualifying local intermediaries. PTIS awards, which may be granted from January 1, 2024, to December 31, 2028, once approved, will be valid for five years from the date of approval.

Evolving Corporate Structures

With the increasing need for tax transparency and tighter scrutiny by tax authorities globally, self-managed investment holding company structures are becoming less popular among individuals. Singapore companies and trusts are increasingly utilised in sophisticated SFO structures, alongside Limited Liability Companies (LLCs), partnerships, and Variable Capital Companies (VCCs). 

The Variable Capital Companies Act, introduced on Tuesday, 14 January 2020 in Singapore, is a new corporate structure for investment funds in Singapore. It provides a flexible framework for managing multiple collective investment schemes under a single umbrella entity, while maintaining ring-fenced protection for each sub-fund’s assets and liabilities. Fund managers can issue and redeem shares with greater flexibility, including the option to pay dividends out of capital, a feature not available in traditional Singaporean corporate structures.

Given its unique flexibility, efficiency, and regulatory oversight, VCCs can be utilised for all types of investment funds, making them an attractive option for fund managers seeking to establish or re-domicile their funds in Singapore. There have been 1000 VCCs incorporated or re-domiciled in Singapore by regulated fund managers based here since the launch of the VCC framework in 2020.

In Singapore, trusts are prevalent in the structures established by wealthy families for asset protection and effective tax planning. Nowadays, trusts do not just hold bankable assets and insurance policies, but are often seen as having a diversified class of assets, ranging from bankable assets and real estate to shares in private operating businesses, substantial listed company shares, art pieces, and digital assets. This has led to an increase in the number of private trust companies. 

Singapore, with its trust law based on English trust law, recognises trusts. Due to its well-defined and regulated legal framework, wealthy international families continue to find Singapore trusts attractive, even though the perpetuity period is only 100 years, compared to the more extended periods permitted under Jersey or British Virgin Islands law. 

To moderate demand for residential property, curb excessive speculation, and discourage property flipping, the Singapore government introduced the Additional Buyer’s Stamp Duty (ABSD) in 2011. Despite a hefty ABSD tax charge (i.e., 65% of the purchase price, effective from Thursday, 27 April 2023) that applies to any transfer of residential property into a living trust, wealthy individuals are not deterred from using trusts to purchase property for their children. This additional tax is to be paid upfront. However, as it is possible to apply to the Inland Revenue Authority of Singapore (IRAS) for a refund of the ABSD so long as certain conditions are fulfilled, using a trust structure to purchase a property would continue to be attractive for the ultra-wealthy individuals. Examples of some of the conditions that need to be fulfilled are that all beneficial owners are identifiable, beneficial ownership has been vested in the beneficiary(ies), the trust cannot be revoked, varied or subject to any subsequent conditions.

Tax Law Changes

Singapore is a member of the Organisation for Economic Co-operation and Development (OECD) and, together with more than 135 jurisdictions, it joined a multilateral consensus on the OECD’s Pillar Two framework that was reached on Friday, 8 October 2021. This framework aims to ensure that multi-national enterprises (MNEs) with global revenues above €750 million pay a minimum tax rate on income within each jurisdiction in which they operate.

Two new top-up taxes, namely the Domestic Top-up Tax (DTT) and the Income Inclusion Rule (IIR), from the BEPS 2.0 Global Anti-Base Erosion (GloBE) rules took effect on Wednesday, 1 January 2025, in Singapore. With the implementation of the DTT and IIR, a minimum effective tax rate of 15% will be imposed on relevant multinational enterprises (MNEs) whose annual group revenue exceeds €750 million (approximately SGD$1.1 billion).   

Foreign MNEs in Singapore, particularly those subject to the Pillar Two threshold and benefiting from specific tax incentives, have inquired about the potential impact on them. Many founders and owners of large multinational businesses looking to expand their operations in Singapore have also been actively engaging tax and legal advisors to explore their options.   

The Singapore government is aware of the potential impact and concerns, and has consistently been developing measures and schemes relevant to business founders and other private wealth clients. One such incentive scheme is the Refundable Investment Credits (RICs), which can offset corporate income tax, domestic top-up tax or multinational top-up tax. RICs can even be refunded to the company in cash within four years.

With Singapore’s competitive corporate tax rate and favourable tax incentives, coupled with its robust financial and legal systems and infrastructure, not only is an exodus of foreign MNEs in Singapore unlikely, but it should also continue to remain an attractive business and financial hub.

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