Section 13O vs 13U: Comparing Singapore’s Family Office Tax Incentive Schemes

Singapore has cemented its position as the premier Asian hub for family offices, with the number of single family offices holding Monetary Authority of Singapore (MAS) incentive approvals growing substantially over the past decade. Central to this success are two tax incentive schemes: Section 13O (formerly 13R) and Section 13U (formerly 13X) of the Income Tax Act. Both schemes provide tax exemptions on specified investment income, but they differ materially in their eligibility requirements, fund structures, local spending obligations, and the sophistication of operation they demand. This guide provides a detailed, side-by-side comparison of the two schemes as at mid-2026.

Background: Why Singapore Offers These Incentives

Singapore’s family office tax incentives are part of a deliberate policy to attract ultra-high-net-worth individuals, family wealth, and the professional ecosystems that accompany them — private bankers, lawyers, accountants, and investment managers. The government’s position has long been that taxing investment returns earned by foreign family offices on their Singapore-managed assets would simply push that capital elsewhere; the economic benefit comes not from taxing the fund, but from the broader ecosystem of professional services and philanthropy that family offices bring.

MAS administers both incentive schemes and has progressively tightened the criteria over the years — most notably via the updated guidelines in August 2023 — to ensure that incentivised family offices represent genuine economic contributions rather than passive holding structures with no real Singapore footprint.

Section 13O: The Singapore-Incorporated Fund Scheme

Who Can Apply

Section 13O applies to funds that are incorporated in Singapore as private limited companies. The fund vehicle itself must be a Singapore-incorporated company — it cannot be a partnership, trust, or overseas entity. This structural requirement is a key distinguishing feature of 13O.

Minimum Assets Under Management

The fund must have a minimum of S$20 million in assets under management (AUM) at the time of application. This is the lower threshold between the two schemes, making 13O more accessible to smaller family wealth pools.

Investment Professionals

The fund manager must employ at least two investment professionals (IPs) who are Singapore-based. These must be genuinely engaged in investment management — not administrative or compliance staff. At least one of the two IPs must be a non-family member. This requirement was introduced to address concerns about family offices being staffed entirely by family members without genuine investment expertise.

Local Business Spending Requirements

Section 13O funds must meet annual local business spending (LBS) requirements, which scale with AUM. As at 2026, the baseline requirement is S$200,000 per year for funds with AUM below S$50 million, rising to S$500,000 per year for funds with AUM above S$50 million. LBS qualifying items include staff costs, office rent, professional fees paid to Singapore-based advisers, and similar operating expenditures.

Capital Deployment

The fund must deploy a specified percentage of its AUM in Singapore-listed or Singapore-connected investments. As at the updated MAS guidelines, this is broadly a requirement to invest at least 10% of AUM or S$10 million (whichever is lower) in Singapore-linked investments. Qualifying investments include equities listed on SGX, Singapore-incorporated private companies, qualifying debt securities issued in Singapore, and funds managed by MAS-licensed managers.

Tax Exemption Scope

Approved 13O funds are exempt from Singapore income tax on specified income derived from designated investments. Specified income includes gains from shares, dividends, interest on qualifying debt, and gains from derivatives. The exemption applies at the fund level, not the investor level.

Section 13U: The Enhanced Tier Fund Scheme

Who Can Apply

Section 13U imposes no requirement that the fund be Singapore-incorporated. The fund vehicle may be a Singapore company, a limited partnership, a variable capital company (VCC), or even an offshore fund vehicle managed from Singapore. This flexibility is a significant advantage for families with complex multi-jurisdiction structures. For more on the VCC framework, see our guide to the Variable Capital Company structure in Singapore.

Minimum Assets Under Management

The minimum AUM threshold for Section 13U is S$50 million. This higher threshold reflects the enhanced tier status and is designed for larger, more established family wealth pools.

Investment Professionals

Section 13U requires at least three investment professionals based in Singapore, with at least one being a non-family member. The higher IP count reflects MAS’s expectation that 13U fund managers will run a more substantive operation than a two-person family office.

Local Business Spending Requirements

The 13U LBS requirements are higher than 13O. The baseline is S$500,000 per year for funds with AUM below S$100 million, rising to S$1 million per year for larger funds. The increased spending obligation reflects the expectation that an enhanced-tier family office will have a meaningful economic footprint in Singapore.

Capital Deployment

Section 13U funds must deploy at least 10% of AUM or S$10 million (whichever is lower) in Singapore-linked investments — the same proportional requirement as 13O but applied to a higher AUM base.

Tax Exemption Scope

The tax exemption under 13U covers the same categories of specified income as 13O. The key advantage for 13U is the greater structural flexibility — families can use existing offshore fund structures and still access the Singapore tax exemption, provided the fund is managed in Singapore by a MAS-licensed or exempt fund manager.

Side-by-Side Comparison

The Private Bank Account Requirement

Both Section 13O and 13U require the family office to maintain a Singapore private bank account for the fund. This requirement ensures that the fund’s assets are genuinely custodied through Singapore’s financial infrastructure. The account must be with a MAS-licensed bank or financial institution.

The Philanthropy Expectation

MAS has made clear its expectation that family offices will contribute to Singapore’s philanthropic ecosystem, but philanthropy remains a soft expectation rather than a hard requirement for either scheme. Some family offices allocate 0.5–1% of AUM to philanthropic activities via donor-advised funds, private foundations, or direct charitable giving. Families that demonstrate a commitment to philanthropy may receive more favourable treatment during the MAS review process.

Which Scheme Is Right for Your Family Office?

The choice between Section 13O and 13U is driven by three primary factors: the size of the family’s investable assets, the desired fund structure, and the family’s appetite for operational expenditure in Singapore.

Families with S$20–50 million in assets will typically apply under Section 13O, as they do not meet the minimum AUM for 13U. Families with S$50 million or more have a choice, and that choice often turns on structure. If the family already has an existing offshore holding structure — a Cayman Islands trust, a BVI holding company, or a Jersey foundation — Section 13U’s flexibility in accepting non-Singapore fund vehicles makes it the more natural fit. Section 13O requires the fund to be a Singapore-incorporated company, which adds setup costs and ongoing compliance obligations.

For families committed to building a genuine Singapore presence — hiring staff, renting office space, engaging local advisers — the higher LBS requirements of 13U are not necessarily a deterrent. Many of the larger family offices established in Singapore view the LBS spending requirement as a baseline they would have exceeded anyway through normal operations.

For guidance on establishing the fund vehicle in Singapore, see our guides to incorporating a company in Singapore and to nominee director arrangements.

Application Process and Annual Compliance

Applications for both Section 13O and 13U are submitted to MAS. The process involves engaging a MAS-licensed fund manager (or obtaining exempt fund manager status), preparing a detailed application setting out the fund structure, AUM, investment strategy, IP details, LBS commitments, and Singapore investment plan, and then awaiting MAS approval.

Once approved, the family office must file annual compliance reports confirming it continues to meet all conditions. Non-compliance — such as falling below minimum AUM or failing to meet the LBS requirement — can result in the tax exemption being withdrawn, with tax assessed on income earned during the non-compliant period.

Recent Regulatory Developments

MAS issued updated family office guidelines in August 2023, significantly tightening the criteria for both schemes. The key changes included the introduction of the non-family IP requirement, the formal capital deployment requirement, and increased LBS thresholds. As at mid-2026, the regulatory framework continues to evolve, and prospective applicants should obtain current guidance from a qualified adviser.

To speak with the team at Raffles Corporate Services, you can email [email protected] or call, SMS, or WhatsApp +65 8501 7133.

— The Editorial Team, Raffles Corporate Services