On 5th July 2023, the Monetary Authority of Singapore (MAS) announced changes to the qualifying criteria for Single Family Office fund vehicles applying for tax exemptions under sections 13O and 13U of the Income Tax Act 1947. Section 13O and Section 13U are two tax incentive schemes that are commonly used to set up Family Offices in Singapore. This article focuses on the effect these changes may pose on the recruitment scene for Family Offices in Singapore.
Singapore has long been a popular jurisdiction for Family Offices. Reportedly, 1100 Single Family Offices were set up in Singapore as of the end of 2022, which was a massive increase from 700 in 2021. The MAS seeks to enhance incentives in five areas in their revised tax incentives, investing in local businesses and the local equity market, creating jobs and value for the local economy, encouraging participation in blended finance structures and encouraging investment in climate-related projects and philanthropic activities. Many believe that these changes are made to ensure that the large influx of Family Offices to Singapore are benefiting the local economy.
Key changes in the qualifying criteria for 13O and 13U applications that are going to affect the recruitment of Singaporean Family Offices include;
- the removal of grace periods and investment professionals hiring requirements.
Previously, all Single Family Office fund vehicles applying for the section 13O / 13U tax incentive were entitled to a grace period to satisfy the minimum requirements for the tax incentive schemes at the point of application. Under the new rules, they must meet the revised conditions at the point of application to qualify for the tax incentive. Another major change Family Office principals must be aware of, are the changes in the minimum number and composition of investment professionals. - Single Family Offices must now employ at least two investment professionals.
Of whom at least one shall not be a family member of the ultimate beneficial owner to be qualified for the 13O tax incentive. This is considered a major change as there were no previous requirements for the inclusion of a non-family member in the 13O scheme. The minimum number and composition of investment professionals for Family Offices applying for the section 13U tax incentive remain unchanged at having three investment professionals with one being a non-family member. Local hires are anticipated to surge after these changes take effect.
That being said, as the grace period has been removed, Principals that are interested in setting up their Single Family Offices must meet all the requirements at the point of the application. While there is an abundance of high-calibre talent in Singapore, finding the right cultural fit for your Family Office can be time-consuming and costly. Family Offices are small entities that act specifically as a wealth management vehicle for ultra-high-net-worth families. With an average of less than five employees, according to our 2023 Global Family Office Compensation Benchmark Report, Family Offices often lack the resources and capacity to recruit. The newly announced changes by the MAS are posing difficulties in the already challenging recruitment processes. As a result this may prompt many Family Office Principals to seek external support.
Agreus is an established full-service resources and recruitment consultancy dedicated to working exclusively with Family Offices. We offer a bespoke service that is tailored to each Family Office, and we specialise in placing entry-level through to executive-level professionals within investments, legal, finance and operational roles. We have established a global presence and have recently expanded to Asia by setting up an office in Singapore. If you need a more tailored conversation about hiring for your Family Office in Singapore, please do not hesitate to get in touch.