Single Family Offices

In recent years, Singapore has seen a surge in the number of Single Family Offices (SFOs) being set up in the city-state. The number of SFOs in Singapore has increased more than two-fold to almost 700 by 2021. This trend is likely to continue, as Singapore’s business-friendly policies and its position as a financial hub in the region make it an attractive destination for wealthy families to establish their own private investment offices.

So, what is a Single Family Office?

It is a private wealth management structure that caters to the needs of a single ultra-high-net-worth family. SFOs are set up to manage and preserve the family’s wealth, invest in private equity, real estate, hedge funds, and other alternative investments, and provide customized financial and administrative services to the family members.

Why are wealthy families setting up SFOs in Singapore?

There are several reasons.

1. Singapore has a favorable tax regime, which makes it an attractive destination for wealth management. Singapore has no inheritance tax, no capital gains tax, and a relatively low income tax rate compared to many other developed countries. This makes it an ideal location for wealthy families to set up their SFOs and manage their wealth.

2. Singapore is a hub for financial services in the region, with a robust regulatory framework, strong legal system, and skilled workforce. The Monetary Authority of Singapore (MAS) is the central bank and financial regulatory authority of Singapore, and it has been instrumental in creating a conducive environment for wealth management in the country. Singapore also has a strong network of professional service providers, including law firms, accounting firms, and wealth management firms, which makes it easy for wealthy families to set up their SFOs and get the necessary support services.

3. Singapore offers a stable political and economic environment, with a pro-business government that is committed to creating a conducive environment for investment and wealth creation. The country has a reputation for being corruption-free and has consistently ranked highly in the World Bank’s Ease of Doing Business rankings.

So, how does one go about setting up an SFO in Singapore?

The process can be complex, but there are several steps that families can take to make it easier.

• Firstly, they need to decide on the type of SFO structure they want to set up. There are several types of SFO structures, including the single family office, the multi-family office, and the virtual family office. Each has its own advantages and disadvantages, and families need to choose the one that best suits their needs.
• Once the SFO structure has been decided, families need to decide on the legal form of their SFO. They can choose to set up a private limited company, a limited liability partnership, or a trust. Each has its own legal and tax implications, and families need to consult with their legal and tax advisors to determine the best option.
• Next, families need to apply for a license from MAS to operate their SFO in Singapore. The application process can be complex, and families need to submit a detailed business plan, financial projections, and other relevant documents to MAS for review. MAS will evaluate the application based on a number of criteria, including the family’s source of wealth, their financial track record, and their ability to manage their wealth.
• Once the license has been granted, families can start setting up their SFO in Singapore. They need to establish an office, hire staff, set up accounting and reporting systems, and establish relationships with service providers such as banks, law firms, and accounting firms. They also need to develop an investment strategy that aligns with their investment goals and risk appetite.

Tax incentives

One of the key advantages of setting up an SFO in Singapore is the tax incentives that are available. Singapore’s tax regime is one of the most attractive in the world for wealth management. The country has a “territorial” tax system, which means that generally, only income earned or received in Singapore is taxed. This makes it easy for families to manage their global wealth without being subject to excessive taxes.

Additionally, Singapore offers several tax incentives to encourage the establishment of SFOs in the country. For example, SFOs are eligible for a tax exemption on specified income, including interest, dividends, and gains from the disposal of investments. This tax exemption applies to income earned from qualifying investments such as shares, bonds, and funds. SFOs are also exempt from tax on foreign-sourced income that is remitted to Singapore.

The licensing process

The licensing process for setting up an SFO in Singapore involves several steps. The first step is to submit an application to MAS for a license to operate an SFO in Singapore. The application must include a detailed business plan, financial projections, and information about the family’s source of wealth and financial track record. MAS will evaluate the application based on several criteria, including the family’s reputation, experience, and ability to manage their wealth.

If the application is approved, the family will be granted a license to operate an SFO in Singapore. The license will specify the activities that the SFO is allowed to undertake and any restrictions on its operations. The family will also be required to comply with certain regulatory requirements, such as maintaining accurate records and submitting periodic reports to MAS.

In conclusion, Singapore’s favorable tax regime, stable political and economic environment, and robust regulatory framework make it an attractive destination for wealthy families looking to establish their own private investment offices. The surge in the number of SFOs in Singapore is a testament to the country’s appeal as a wealth management destination. However, setting up an SFO in Singapore can be a complex and time-consuming process, and families need to work with experienced regulatory and tax advisors to navigate the regulatory landscape. The tax incentives available to SFOs in Singapore make it an even more attractive destination for wealth management.