Singapore: Changes to Singapore's fund tax incentive schemes

16 Oct 2024    3 minute read

In brief

On 1 October 2024, the Monetary Authority of Singapore (MAS) issued a circular that introduces changes to the fund tax incentives schemes available under S13D, S13O, S13OA and S13U of the Singapore Income Tax Act 1947.

Contents

Key takeaways

The MAS circular (Circular) covers the following matters:

  • Changes to the qualifying and economic conditions for fund incentives for S13O/OA/U funds managed by licensed fund managers, such as the following:
    • The introduction of a minimum Investment Professional (IP) requirement of two IPs for S13O/OA funds.
    • The introduction of a minimum assets under management (AUM) in Designated Investments (DI) requirement (of SGD 5 million for S13O/13OA funds, and SGD 50 million for S13U funds) that needs to be maintained for the life of the fund.
    • The introduction of a tiered local business spending requirement (ranging from SGD 200,000 to SGD 500,000 depending on the AUM in DI of the S13O/OA/U fund as at the end of each financial year (FY)) for S13O/OA/U funds.
    • The inclusion of an option for closed-ended funds to make an irrevocable election for flexibility in the manner in which it meets the revised economic conditions during the fund's limited life.
    • The inclusion of a grace period for existing S13O/U funds to meet the revised conditions from FY 2027.
  • A clarification that, for the new S13OA scheme that will take effect from 1 January 2025 for funds established as Singapore limited partnerships, the economic and qualifying conditions would apply at the partnership level.
  • A clarification that S13D funds will continue to self-assess whether they qualify for the scheme but, with effect from YA 2028 (FY 2027), the S13D funds must be managed by a Singapore fund management company that employs at least one investment professional.
  • While the changes apply mostly to non-SFO managed funds, there are some key changes that apply to both non-SFO and SFO ("single family office") managed funds, such as the following:
    • The removal of the requirement that a S13O fund cannot acquire the investments prior to the commencement date of the S13O incentive.
    • A change in the computation of AUM to refer to "AUM in Designated Investments" instead of computing AUM based on the net asset value (NAV) of the fund.
    • The removal of additional economic criteria for the addition of multiple special purpose vehicles (SPVs)/trading feeders to a S13U Master-SPV/Master-Feeder fund structure.
    • The removal of the condition for S13O/U funds to invest according to the MAS-approved investment strategy.
    • A clarification of the treatment of investments in limited partnerships as DIs.

Click here to read the full alert.

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Enoch Wan, Senior Associate, contributed to this legal update.

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