Singapore has established itself as a global financial hub, offering attractive tax incentives to encourage fund management activities.
Among these incentives, Sections 13U, 13O, and 13D of the Income Tax Act 1947 provide tax exemptions for funds managed by Singapore-based fund managers.
These schemes are administered by the Monetary Authority of Singapore (MAS) and aim to support the growth of Singapore’s private wealth and fund management industry.
Section 13U: Enhanced-Tier Fund Tax Incentive
Section 13U (formerly known as Section 13X) is designed for larger fund structures with a minimum fund size requirement. It provides tax exemptions on specified income derived from designated investments, including stocks, bonds, and derivatives.
To qualify, the fund must:
- Be managed by a Singapore-based fund manager
- Maintain a minimum fund size of at least SGD 50 million or more
- Meet economic substance requirements, such as local business spending and employment of investment professionals
Section 13O: Onshore Fund Tax Incentive
Section 13O (formerly Section 13R) applies to onshore funds incorporated in Singapore. It offers tax exemptions on specified investment gains, provided the fund:
- Is tax resident in Singapore
- Is managed by a Singapore-based fund manager
- Meets local business spending requirements
This scheme is particularly attractive for family offices looking to establish a presence in Singapore while benefiting from tax exemptions on specified investment income.
Section 13D: Offshore Fund Tax Incentive
Section 13D applies to offshore funds that are not incorporated in Singapore but are managed by a Singapore-based fund manager. It provides tax exemptions on specified income from designated investments, ensuring that offshore funds remain competitive in Singapore’s financial ecosystem.
Key Benefits of These Tax Incentives
- Tax Efficiency: Exemptions on investment gains enhance fund profitability
- Encourages Fund Management Growth: Supports Singapore’s position as a leading financial hub
- Attracts Global Investors: Provides certainty on tax treatment for fund structures
Singapore continues to refine its fund tax incentive schemes to maintain its position as a leading financial hub.
These tax incentives have played a crucial role in attracting high-net-worth individuals, institutional investors, and family offices to Singapore.
If you’re considering setting up a fund in Singapore, consulting a tax expert or legal advisor is recommended to ensure compliance with MAS regulations.
Latest Updates on Singapore’s Fund Tax Incentives
Singapore continues to refine its fund tax incentive schemes to maintain its position as a leading financial hub.
On 1 October 2024, the Monetary Authority of Singapore (MAS) issued Circular FDD Cir 10/2024, detailing revisions to Sections 13U, 13O, and 13D of the Income Tax Act 1947.
These changes, effective 1 January 2025, aim to enhance economic substance requirements and ensure alignment with global fund management standards.
Section 13U: Enhanced-Tier Fund Tax Incentive
Section 13U remains the premium tax exemption scheme for large funds, but with a key update:
- AUM Requirement: Funds must maintain SGD 50 million in designated investments (DI) at the time of application and at the end of each basis period.
- Business Spending: The required local business spending (LBS) now varies between SGD 200,000 and SGD 500,000, depending on AUM.
Section 13O: Onshore Fund Tax Incentive
Section 13O, designed for Singapore-incorporated funds, has been updated to:
- Require SGD 5 million in DI at the end of each basis period.
- Align its AUM calculation method with Section 13U, shifting from net asset value (NAV) to DI-based valuation.
Section 13D: Offshore Fund Tax Incentive
Section 13D, applicable to offshore funds, now includes a new employment requirement:
- Fund managers must employ at least one investment professional in Singapore with effect from the Year of Assessment 2028 (financial year ending 2027).
- The scheme remains self-administered, but MAS has emphasised stricter compliance monitoring.
Introduction of Section 13OA for Singapore-registered Limited Partnership Funds
- A notable addition is Section 13OA, which extends Section 13O benefits to funds constituted as limited partnerships (LPs) in Singapore. This change reflects Singapore’s commitment to supporting diverse fund structures.
Extended Expiry Date & Tax Remission Schemes
- The expiry date for Sections 13D, 13O, and 13U has been extended to 31 December 2029.
- Additionally, the Goods and Services Tax (GST) remission scheme and withholding tax (WHT) exemption scheme for funds under these sections have also been extended to the same date.
Implications for Fund Managers
- These updates reinforce Singapore’s economic substance requirements, ensuring that fund managers contribute meaningfully to the local economy.
- Fund managers should review their AUM calculations, business spending commitments, and employment structures to remain compliant.
