Key takeaways

Changes to the Section 13O and Section 13U incentive schemes

• MAS has revised the conditions for the 13O/U tax incentive scheme for funds managed by SFOs.
• The updated conditions will apply to all new 13O/U applications from 5 July 2023 onwards. However, funds with existing 13O/U awards may elect to take advantage of the changes to the business spending requirement and local investment requirement (now called the Capital Deployment Requirement).
• Under the updated conditions, there is no longer a grace period for applicants to meet the minimum conditions of the 13O/U scheme at the point of application, in particular the minimum Assets Under Management (AUM) requirement, minimum number of investment professionals employed by the SFO, and minimum number of investment professionals who are not family members of the beneficial owners. In addition, only local (and not overseas) business spending will be recognised under the minimum business spending requirement.
• Eligible donations to Singapore charities as well as grants to qualifying blended finance structures may now be recognised under the minimum business spending requirement. In particular, two dollars for every dollar spent on grants to qualifying blended finance structures may be recognised when computing if the minimum business spending requirement is met.
• Under the Capital Deployment Requirement (CDR), more categories of eligible investments have been added. Additionally, the amount invested in certain eligible investment categories will be scaled by a multiplier of 1.5 times or 2 times, when computing if the CDR is met.

Introduction of the PTIS for SFOs

• The PTIS seeks to encourage greater philanthropic giving among SFOs and the development of philanthropic capabilities in Singapore. The scheme is available to SFO applicants who are managing a fund with a 13O/U award.
• Approved qualifying donors will be able to claim 100% tax deduction (capped at 40% of their statutory income) for overseas donations made through qualifying local intermediaries for a period of five years.
• The qualifying donor may be the SFO applicant, the Ultimate Beneficiary Owner (UBO) or beneficiary of the 13O/U fund, or a related family business.
• The SFO will also be required to meet the following economic commitments (in addition to the relevant 13O/U conditions): (i) appoint and maintain a philanthropy professional, (ii) incur additional local business spending of SGD 200,000, and (iii) employ an additional local professional headcount.

Read the full alert here.

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