Singapore is set to be the philanthropic hub of Asia following the introduction of a new tax reduction incentive targeting Family Offices.
Singapore has announced a new tax incentive for donors with Family Offices in the FY2023 budget statement. Donors with funds under section 13O or 13U schemes will be eligible for a 100% tax deduction for overseas donations, given that it is made through qualifying local intermediaries. The tax deduction is capped at 40% of the donor’s statutory income. The Monetary Authority of Singapore (MAS) will release further information regarding the implementation in June 2023. This new tax incentive appears to be the first time that overseas donations are eligible for a tax deduction and it is expected to drive philanthropic activities in the country.
Singapore is rapidly emerging as Asia's top Family Office Hub. According to the Singapore Economic Development Board (EDB), there are currently 700 Family Offices located in Singapore. Millionaires and wealthy families have long been the key philanthropic force behind giving back to the community and making positive changes. Therefore, as the wealth in the region grows, so does philanthropy. Many families view philanthropy as a way to build and sustain their legacy, this mindset is particularly visible among the younger successors compared to the older generation of the Family Offices. As a result of wealth transitions, philanthropy is being increasingly integrated within the operations of Family Offices.
The Asia-Pacific (APAC) Family Office Report conducted by Campden Wealth in 2021 discovered that 9 out of 10 APAC Family Offices are involved in philanthropy. Additionally, according to UBS, 71% of Family Offices across the world engage in philanthropy, with an average annual spending of USD $6.4 million each in 2020. This indicates a heightening interest among high-net-worth individuals and families in philanthropic activities. Subsequently, the new tax incentive will stimulate growth in philanthropic activities and attracts capital into Singapore, boosting the country’s status as the philanthropic hub of Asia.
Philanthropy is becoming strategic and impactful as the younger generations of Family Offices prefer to actively engage in philanthropic activities. Singapore allows these Family Office leaders to explore the multitude of philanthropic activities, such as venture philanthropy, social impact bonds and impact investing. In fact, many Family Offices in Singapore have adopted impact investing to extend their support to social and environmental causes. Research conducted by DBS Private Bank shows that Family Offices now play an imperative role in driving Singapore’s net-zero economy.
You can only make the most impact with your capital when great opportunities and an established ecosystem are present. Singapore has an amazing support network of Family Offices, charity foundations, impact funds, intermediaries and impact organisations across the ecosystem, allowing collaborative efforts to be made for philanthropic objectives. The country also provides access to centres of excellence, think tanks and research networks that serve various philanthropic interests. With generous tax incentives for philanthropy, it is believed that Singapore will continue to channel wealthy families’ philanthropic interests and encourage them to give back to the local community. This will also strengthen Singapore’s role as a purposeful financial centre and the Family Office Hub of Asia.