MAS announces enhancements relating to single family offices

28 July 2023

The Monetary Authority of Singapore (“MAS”) has published the remarks given by Ravi Menon, Managing Director, MAS, at the MAS Annual Report and MAS Sustainability Report 2022/2023 media conference on 5 July 2023. Among other things, Mr Menon spoke on how MAS is harnessing the benefits, and addressing the risks, of wealth inflows. This article focuses on the key enhancements relating to single family offices (“SFO”) outlined in Mr Menon’s remarks.

Mr Menon observed that, as a trusted, vibrant, and well-regulated international financial centre, Singapore has attracted large inflows of wealth to be managed here. Family offices are one particular category of individual investment. The number of SFOs awarded tax incentives by MAS increased to 1,100 as of the end of 2022, up from 700 in 2021.

MAS will be taking additional measures to strengthen surveillance and defence against money laundering risks in the SFO sector, as well as adjusting the tax incentives for SFOs.

Additional measures to strengthen surveillance and defence against money laundering risks

While family offices in Singapore are already substantially covered for money laundering risks, MAS will take additional measures to strengthen surveillance and defence against money laundering risks in the SFO sector by requiring all SFOs to:

  • notify MAS when they commence operations and on an annual basis; and
  • maintain a business relationship with an MAS-regulated financial institution that would perform anti-money laundering checks on these SFOs.

MAS is expected to release a public consultation paper on these proposals in due course.

Adjusting tax incentives for SFOs

MAS has been providing tax incentives to the SFO sector to help create jobs, generate demand for domestic service providers, and channel capital to enterprises in Singapore. The incentive schemes exempt from tax qualifying SFOs’ income derived from investments managed in Singapore. In return, the SFOs commit to manage assets, hire employees here, and incur business spending.

Specifically, SFOs applying for tax incentives are required to (a) employ a minimum of two to three investment professionals, (b) incur business spending of S$200,000 to S$1 million, depending on the size of the SFO’s funds, and (c) invest at least S$10 million or 10% of their assets under management, whichever is lower, in Singapore equities, bonds, funds, or Singapore operating companies.

MAS will be adjusting the tax incentives for SFOs and making enhancements in five areas to encourage SFOs to deploy their capital more purposefully to benefit Singapore and the region, and to increase contributions towards environmental and social causes.

Scale up blended finance structures

MAS will introduce three new features to encourage SFOs to participate in blended finance structures, including those which support the region’s transition to net zero:

  • The scope of eligible investments will be broadened to include blended finance structures in which financial institutions in Singapore have been substantially involved.
  • MAS will give more recognition to concessional capital invested in such blended finance structures. Concessional capital is capital that accepts lower returns or higher risks, compared to other investors, and can help catalyse commercial capital into worthwhile, but less attractive green and transition projects. For every dollar of concessional capital invested, MAS will recognise it as equivalent to up to S$2 of investments for the purpose of assessing if the SFO has met its investment requirement.
  • MAS will recognise grants that SFOs give to support such blended finance structures. Grants have no expectation of income or return of principal. Given its deeply concessional nature, MAS will recognise as S$2 for every dollar of grant given to blended finance structures.

To encourage climate-related investments

MAS will encourage SFOs to invest in climate-related projects. In assessing if the SFO has met its investment requirement, MAS will recognise its climate-related investments anywhere in the world, and not limited to Singapore.

Investing in Singapore companies and equities market

Two enhancements will be made to encourage SFOs to invest in Singapore companies and the local equity market. First, the scope of the tax incentive will be expanded to recognise all investments in non-listed Singapore operating companies (including private credit), and not just private equity investments. Secondly, MAS will recognise twice the amount invested in Singapore-listed equities, and in eligible exchange traded funds and unlisted funds which invest primarily in Singapore-listed equities, for purposes of meeting the SFO’s investment requirement.

Job creation and value creation for Singapore ecosystem

Two enhancements will be made to encourage SFOs to contribute more to job creation and value creation for the Singapore ecosystem:

  • at least one of the investment professionals that SFO applicants currently need to hire must be a non-family member. This will expand the pool of available jobs for professionals in Singapore; and
  • all new SFO applicants will now have to meet the business spending requirement solely from spending locally unlike previously when this could be met with overseas spending. This will help channel greater benefits to Singapore-based businesses and service providers.

To encourage philanthropy

To encourage SFOs to conduct philanthropic activities through Singapore, both locally and overseas, MAS will recognise donations to local charities alongside normal business spending.

To encourage giving overseas using Singapore family offices as a base, MAS launched on 5 July 2023 the Philanthropy Tax Incentive Scheme (“PTIS”) for family offices to encourage philanthropic giving as a regular, professional feature of family offices in Singapore. The PTIS, which was announced in Budget 2023 and will go live on 1 January 2024, will allow qualifying donors in Singapore to claim 100% tax deduction, capped at 40% of the donor’s statutory income, for overseas donations made through qualifying local intermediaries.

Reference materials

The following materials are available on the MAS website www.mas.gov.sg: