Singapore is one of the world’s leading family office destinations — and a significant part of its appeal lies in two tax exemption frameworks administered by the Monetary Authority of Singapore (MAS): Section 13O and Section 13U of the Income Tax Act 1947. Both schemes grant tax exemption on specified investment income earned by a qualifying fund vehicle managed by a Singapore-based fund manager, but they differ in their eligibility thresholds, structural requirements, and operational constraints.
Choosing between 13O and 13U — or deciding whether either scheme is appropriate for your family office — requires a careful analysis of your AUM, investment team, fund structure, and long-term objectives. This guide walks through the key differences in plain terms.
What Are Section 13O and Section 13U?
Sections 13O and 13U of the Income Tax Act 1947 provide tax exemption on “specified income” derived by a qualifying fund from “designated investments.” In practical terms, this means that a family office fund vehicle that qualifies under either scheme pays no Singapore income tax on investment returns — including interest, dividends, rental income from REITs, and gains from the disposal of designated investments such as shares, bonds, futures, and foreign currencies.
The exemption covers the fund vehicle itself — not the family members or individual beneficiaries. Whether distributions from the fund to family members are taxable depends on the tax residency of those individuals and the nature of the distribution. Singapore does not impose capital gains tax, and dividend distributions from a Singapore-resident fund are generally not taxable in the hands of Singapore tax-resident recipients under the one-tier corporate tax system.
Both schemes are administered by MAS, which evaluates applications and grants approval. Approval is not automatic — MAS assesses each application on its merits, and the process typically takes three to six months.
Side-by-Side Comparison: Section 13O vs Section 13U
| Criterion | Section 13O | Section 13U |
|---|---|---|
| Fund residency | Fund vehicle must be Singapore tax-resident | Fund vehicle may be Singapore tax-resident or non-resident |
| Minimum AUM at application | S$20 million | S$50 million |
| Minimum AUM ongoing | S$20 million (to be maintained throughout the incentive period) | S$50 million (to be maintained throughout the incentive period) |
| Investment professionals required | Minimum 2 (at least 1 must be a non-family member) | Minimum 3 (at least 1 must be a non-family member) |
| Non-family member IP requirement | At least 1 IP must not be a family member of the principal family | At least 1 IP must not be a family member of the principal family |
| Fund manager requirement | Fund must be managed by a Singapore-based fund manager holding a CMS licence or registered under the Securities and Futures Act | Same — fund must be managed by a Singapore-based CMS licensed or registered fund manager |
| Local Business Spending (LBS) — AUM < S$50M | Minimum S$200,000/year | N/A (13U minimum AUM is S$50M) |
| Local Business Spending — AUM S$50M–S$100M | Minimum S$500,000/year | Minimum S$500,000/year |
| Local Business Spending — AUM S$100M–S$500M | Minimum S$1,000,000/year | Minimum S$1,000,000/year |
| Local Business Spending — AUM > S$500M | Minimum S$2,000,000/year | Minimum S$2,000,000/year |
| Singapore investment requirement | At least 10% of AUM or S$10 million (whichever is lower) must be invested in specified Singapore investments | At least 10% of AUM or S$10 million (whichever is lower) must be invested in specified Singapore investments |
| Concessionary tax on income not covered by exemption | 10% concessionary rate on investment income not covered by the exemption (where applicable) | 10% concessionary rate on investment income not covered by the exemption (where applicable) |
Unpacking the Key Differences
Fund Residency Flexibility
The most structurally significant difference is that Section 13U does not require the fund vehicle to be Singapore tax-resident. This gives advisers greater flexibility when designing the overall family office holding structure — for example, a fund vehicle established in the Cayman Islands or BVI can qualify under 13U (provided the management and investment decision-making occurs in Singapore through a licensed fund manager), while it would not qualify under 13O.
This difference matters particularly for families with existing offshore holding structures who wish to bring their investment management activities to Singapore without having to change the domicile of the fund vehicle itself. Under 13U, the Singapore nexus is achieved through the fund management function rather than the fund vehicle’s tax residency.
AUM Thresholds and Investment Professional Requirements
Section 13O is the entry-tier scheme, accessible to families with S$20 million or more in investable assets. Section 13U requires a higher AUM of S$50 million and an additional investment professional. The non-family member investment professional requirement — introduced in MAS’s 2023 updates — reflects Singapore’s desire to ensure that family offices contribute genuine investment expertise to the local financial ecosystem, rather than simply serving as vehicles for passive holding of assets.
Investment professionals (IPs) must be Singapore-based individuals who are actively involved in the investment management of the fund. Part-time or administrative roles do not qualify. IPs must hold relevant qualifications and experience, and MAS assesses their credentials as part of the application review. For family offices where all investment professionals are family members, the requirement to hire at least one non-family member IP represents a real operational commitment — typically a CIO, portfolio manager, or senior analyst.
Local Business Spending Requirements
Both schemes require a minimum level of local business spending (LBS) — expenditure with Singapore-based service providers including fund managers, legal advisers, accountants, banks, and custodians. The LBS requirement scales with AUM: at S$20 million AUM, the minimum is S$200,000 per year under 13O; at S$50 million and above, the minimum is S$500,000 per year under both schemes.
In practice, a family office with a properly structured Singapore operation — employing at least two investment professionals, paying management fees to a licensed fund manager, retaining legal and accounting advisers, and using a Singapore-based custodian — will typically exceed these LBS thresholds without difficulty. The LBS requirement is more of a floor check than an active constraint for well-structured family offices.
Singapore Investment Requirement
Both 13O and 13U require that a minimum portion of the fund’s assets be invested in Singapore — at least 10% of AUM, or S$10 million, whichever is lower. Qualifying Singapore investments include Singapore-listed equities, Singapore Government Securities (SGS), bonds issued by Singapore entities, private equity investments in Singapore-based companies, and qualifying Singapore REITs.
This requirement reflects Singapore’s policy objective of channelling family office capital into the domestic investment ecosystem. For families with diversified global portfolios, a 10% allocation to Singapore assets is generally manageable and can include liquid instruments such as SGS bonds without meaningfully constraining overall portfolio strategy.
Which Scheme Is Right for Your Family Office?
The practical decision framework is as follows:
- Choose Section 13O if: Your investable assets are in the S$20–50 million range, you are comfortable with a Singapore tax-resident fund vehicle, and you have (or can hire) at least two investment professionals including one non-family member.
- Choose Section 13U if: Your AUM is S$50 million or above, you have an existing offshore fund structure that you wish to retain as the vehicle, you require the additional structural flexibility of a non-Singapore-resident fund, or you are managing assets for a broader investor base beyond the immediate family.
- Consider neither (for now) if: Your AUM is below S$20 million or you are unable to meet the investment professional requirements. In this case, you may still be able to access Singapore’s fund management and banking infrastructure without a formal MAS incentive, and revisit the 13O application once your AUM reaches the threshold.
The Application Process
Applications for both Section 13O and 13U are submitted to MAS via a prescribed application form available on the MAS website. The application must include details of the fund structure, the fund manager, the investment professionals, the fund’s investment mandate, the proposed LBS budget, and the Singapore investment allocation plan.
MAS typically takes three to six months to process an application, though more straightforward cases can be approved more quickly. Both schemes require annual reporting to MAS on LBS expenditure, AUM, investment professional headcount, and the Singapore investment allocation. Failure to maintain the required conditions can result in withdrawal of the incentive and recovery of the tax benefits granted.
Singapore also offers complementary pathways for ultra-high-net-worth individuals relocating to Singapore, including the Global Investor Programme (GIP). For a comprehensive overview of all Singapore relocation pathways for high-net-worth individuals, see our guide on how to move to Singapore as a high-net-worth individual.
Conclusion
Section 13O and Section 13U are among the most powerful tools in Singapore’s toolkit for attracting family office wealth. Both offer genuine tax exemption on investment income, but they serve different family profiles: 13O for the entry-tier family office with Singapore-domiciled funds, and 13U for larger, more sophisticated families seeking greater structural flexibility. The right choice depends on your AUM, existing fund architecture, investment team, and long-term objectives.
Setting up a family office in Singapore is a multi-step process that involves MAS applications, fund structuring, fund manager licensing, corporate secretarial compliance for the holding entities, and ongoing tax reporting. Raffles Corporate Services provides integrated corporate secretarial, compliance, and accounting support for Singapore family offices and their associated entities, working alongside your legal and tax advisers to ensure every compliance obligation is met.
— The Editorial Team, Raffles Corporate Services
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