The number of single-family offices (SFOs) in Singapore has reached 1,100 as of the end of 2022, with following the central bank introducing a range of tax incentives that encourage more local hires and an increase in investments in locally.
This is a significant leap up from the SFO count of 700 at the end of 2021, the Monetary Authority of Singapore (MAS) revealed in its annual report published on 5 July.
Spurring the growth is the fact that an SFO is not required to be registered or licensed by the MAS as these firms do not manage third-party funds.
The central bank is now expanding the scope of tax incentives for SFOs, to recognise all investments in non-listed companies operating in Singapore, including private credit, in the hopes of encouraging more SFOs to invest set up in the city state.
To further encourage more SFOs to invest further in Singapore, MAS will also recognise twice the amount invested in Singapore-listed equities, eligible exchange-traded funds and unlisted funds that invest primarily in Singapore-listed equities.
At the same time, SFOs will also be required to employ at least one non-family member among its investment professionals.
A range of perks in Singapore
The MAS will also incentivise SFOs to use Singapore as a base for overseas philanthropic initiatives, via the launch of the philanthropy tax incentive scheme (PTIS), first announced in this year’s budget.
In line with this, qualifying donors in Singapore can claim 100% tax deductions for overseas donations made through qualifying local intermediaries, from 1 January 2024. This is capped at 40% of the donor’s statutory income.
“We hope the introduction of PTIS will encourage philanthropic giving to become a regular, professional feature of family offices here,” Ravi Menon, managing director of MAS, said in a media briefing on 5 July.
Additionally, all new SFO applicants will have to meet the business spending requirement with spending solely from Singapore, unlike previously when overseas spending counted.
In the same vein, climate-related investments made by SFOs anywhere in the world will now be recognised by the MAS.
The new changes will expand the pool of available jobs for professionals in Singapore, as well as channel greater benefits to Singapore-based businesses and service providers, Menon detailed.
Other new benefits for SFOs include broadening the tax incentive coverage to include blended finance structures. To encourage concessional capital, authorities will recognise up to S$2 of investments for every dollar of concessional capital invested.
According to the MAS, SFOs granted tax incentives managed about S$90 billion ($66.6 billion) of assets as of 2021, less than 2% of the $5.4 trillion total assets managed in Singapore.
“Contrary to popular perception, the bulk of the wealth flows into Singapore come from institutional investors and not family offices or high net worth individuals,” Menon said.
Non-retail individual clients – including family offices, clients of external asset managers, private trusts, and high- net- worth individuals – made up only 20% of the increase in total assets managed in Singapore from 2017 to 2021, MAS detailed.
