Section 13O vs 13U: Comparing Singapore Family Office Tax Incentives (2026)

Singapore has established itself as Asia’s leading family office hub, with more than 2,000 single family offices operating under the Monetary Authority of Singapore’s (MAS) tax incentive framework by 2026. At the heart of this framework are two fund tax exemption schemes: Section 13O and Section 13U of the Income Tax Act 1947. Both can lawfully exempt qualifying investment income from Singapore tax — but they target different family office profiles and impose materially different requirements.

If you are setting up a Singapore family office, or reviewing an existing structure, understanding the practical differences between 13O and 13U is essential before approaching MAS. The choice affects your fund vehicle, minimum assets under management, staffing obligations, local spending commitments, and ongoing compliance burden. Getting it right from the outset saves considerable restructuring cost later.

In 2026, MAS extended both schemes to 31 December 2029, while simultaneously tightening the qualifying conditions — signalling that Singapore welcomes substantive family offices but is actively filtering out shell structures. This guide breaks down the key differences so you can make an informed decision about which scheme suits your family’s situation.

What Are Section 13O and Section 13U?

Both sections sit within the Income Tax Act and grant a tax exemption on “specified income” derived from “designated investments” held by the qualifying fund entity. Designated investments include equities, bonds, unit trusts, derivatives, and real estate investment trusts — in short, the mainstream asset classes that most family offices hold.

The two schemes share the same legislative architecture but differ significantly in their eligibility thresholds, fund vehicle requirements, and operational conditions. Section 13O is the entry-level scheme, designed for families with a Singapore-based investment office and a moderate pool of assets. Section 13U is for larger, more sophisticated family offices willing to commit to a higher local footprint.

Both schemes are administered by the MAS. Applications are submitted through the MAS online portal, and approval is granted only after MAS is satisfied that the structure meets all qualifying conditions. This is not a rubber-stamp process — MAS applies genuine scrutiny, particularly on the investment professional headcount and the genuineness of local business spending.

Key Differences at a Glance

Fund Vehicle: The Critical Structural Difference

Under Section 13O, the fund entity must be a Singapore-incorporated company or, since 2020, a Variable Capital Company (VCC). This requirement anchors the fund within Singapore’s corporate registry. For families who want a clean, onshore structure with full Singapore legal personality, this is often the natural choice. The Singapore company is also straightforward to open bank accounts for and is well understood by Singapore custodians and brokers.

Under Section 13U, the fund entity can be incorporated anywhere — Cayman exempted companies, British Virgin Islands companies, Guernsey limited partnerships, and Singapore entities are all acceptable. This flexibility matters for families with legacy offshore structures or those managing assets across multiple jurisdictions. A Cayman fund managed by a Singapore-based family office can qualify for 13U, provided the Singapore office employs sufficient investment professionals and meets the local business spending requirements.

For families moving to Singapore for the first time with a fresh structure, 13O is typically simpler and more cost-effective to establish. For families with established offshore fund vehicles who want to relocate management to Singapore, 13U preserves the offshore fund vehicle while still accessing Singapore’s tax incentive.

Assets Under Management: The 10x Threshold Gap

The AUM requirement is the single biggest differentiator in practice. Section 13O requires a minimum of S$5 million in designated investments, tested at each financial year-end. This is a meaningful but accessible threshold for many family offices. A family with a S$10 million Singapore investment portfolio can qualify without difficulty.

Section 13U demands S$50 million in designated investments at the time of application and at each financial year-end thereafter. Families whose assets fall below this threshold mid-year risk losing their exemption for that basis period — MAS does not provide a grace period for temporary dips below the minimum. Careful asset management and a buffer above S$50 million is therefore prudent.

One practical implication: families who start with 13O can apply to upgrade to 13U once their assets grow beyond S$50 million. MAS accepts such applications and will assess the new conditions at the time of the upgrade request.

Investment Professional Requirements

Both schemes require a minimum of three investment professionals (IPs) based in Singapore. An IP is defined as an employee or director of the fund management entity who spends the majority of their time in Singapore on activities related to fund management.

The key rule under Section 13O is that at least one of the three IPs must be a non-family member. MAS tightened this in 2022 and has emphasised in its 2026 guidance that this is a substantive requirement — the non-family IP must genuinely participate in investment decision-making, not merely hold a token position. Families who place a trusted employee or an external fund manager as the third IP purely on paper risk losing their incentive on audit.

Under Section 13U, the IP requirements are similar but the expectation of genuine investment activity is, if anything, higher given the larger asset pool. MAS expects the IP team to be actively managing the portfolio and capable of demonstrating ongoing investment activity through records, trade logs, and investment committee minutes.

Local Business Spending

Both schemes impose tiered Local Business Spending (LBS) requirements — a minimum annual spend with Singapore-based service providers. The tiers are:

• AUM below S$250 million: S$200,000 per year
• AUM between S$250 million and S$2 billion: S$300,000 per year
• AUM above S$2 billion: S$500,000 per year

Eligible spending includes fees paid to Singapore-based fund administrators, custodians, legal advisers, tax advisers, auditors, compliance consultants, and family office operating costs. Salaries paid to Singapore-based employees (including the IPs themselves) do not count towards LBS — the requirement is specifically designed to channel spending towards Singapore’s professional services industry.

For a 13O family office with S$10 million AUM, the S$200,000 LBS commitment represents 2% of assets annually — a meaningful cost that should be factored into the setup budget alongside the costs of maintaining a registered office, audit, and MAS compliance reporting.

The Singapore Investment Requirement (Section 13U Only)

A distinguishing feature of Section 13U is the obligation to deploy a minimum percentage of AUM into MAS-specified Singapore assets. This requirement was introduced to ensure that large family offices make a genuine contribution to Singapore’s capital markets, not merely use Singapore as a tax-efficient management base.

The Singapore assets include equities listed on SGX, Singapore bonds, Singapore-focused private equity, and loans to Singapore-based businesses. The exact percentage and eligible asset categories are specified in the MAS conditions letter issued upon approval and should be reviewed carefully before committing to the 13U structure.

This Singapore investment obligation does not apply to 13O, which makes 13O more suitable for families whose portfolios are entirely in global markets and who do not wish to maintain a dedicated Singapore allocation.

Cost Comparison: 13O vs 13U

Setting up and maintaining a family office under either scheme involves significant ongoing costs beyond the initial MAS application. A realistic first-year budget for a Section 13O family office runs approximately S$300,000 to S$500,000, covering incorporation, professional advisory fees, IP salaries, office space, MAS application, audit, and local business spending commitments.

A Section 13U family office typically requires S$700,000 to S$1.5 million in year one, reflecting the higher IP headcount expectations, more complex fund vehicle management (particularly if using an offshore vehicle), and the Singapore investment deployment obligation. Ongoing annual costs at 13U level are meaningfully higher.

These cost figures are in addition to any investment management fees paid to external managers. They represent the compliance and governance overhead of maintaining the exemption — not the cost of managing the family wealth itself.

Which Scheme Should You Choose?

The right choice depends on four factors: the size of your investible assets, the complexity of your existing fund structure, your appetite for Singapore investment allocation, and the level of operational sophistication your family office is prepared to maintain.

As a general rule:

• Choose 13O if your investible assets are between S$5 million and S$50 million, you want a clean Singapore-incorporated fund vehicle, and you prefer a simpler compliance framework without a mandatory Singapore investment allocation.
• Choose 13U if your investible assets exceed S$50 million, you have an existing offshore fund vehicle you wish to retain, or you are a significant wealth owner who values the higher international credibility of the enhanced-tier scheme.
• Consider starting with 13O and upgrading if your assets are currently below S$50 million but are expected to grow materially within three to five years.

In all cases, the decision should be made in consultation with an experienced Singapore family office adviser. MAS has limited appetite for restructuring applications from families who chose the wrong scheme at inception — getting the structure right from the start is far preferable. For the tax aspects, ensure you have [legal and tax advice from a qualified practitioner](https://www.justfollowlaw.com) before applying.

For the latest updates on Singapore’s family office landscape and MAS incentive framework, there are helpful resources covering [Singapore business and investment news](https://littlebigreddot.com/business/) for wealth owners and their advisers.

For families exploring broader wealth management decisions alongside their family office structure, sound financial planning across different asset classes is worth considering alongside the Singapore corporate and tax structuring.

How Raffles Corporate Services Can Help

Raffles Corporate Services assists high-net-worth families and their advisers with the full family office setup process in Singapore — from initial structuring advice and fund vehicle incorporation to MAS application management, annual compliance reporting, and corporate secretarial services for the fund entity. We work with external lawyers, tax advisers, and licensed fund managers to deliver an integrated solution.

To speak with the team at Raffles Corporate Services, you can email [email protected] or call, SMS, or WhatsApp +65 8501 7133. We are happy to assist with any queries.

— The Editorial Team, Raffles Corporate Services