Tax Benefits Enjoyed by Family Offices in Singapore and Spin-offs for the Economy

Mr Speaker, the purpose of our tax incentives for single family offices (SFOs) is to provide them certainty that the funds they set up will not be taxed on income derived from investments managed in Singapore. Without such certainty, funds of a single family office may be taxed in Singapore in addition to the tax that the family, as an investor, may be subject to. This would make it unattractive for SFOs to set up and invest in funds in Singapore.

To qualify for the tax incentives, applicants must be able to demonstrate their contribution to Singapore's economy. They must meet minimum requirements on business spending, assets under management and creating investment professional jobs here.

The Monetary Authority of Singapore (MAS) regularly reviews its tax incentives schemes. In April 2022, MAS raised the minimum criteria for SFOs by: one, increasing hiring requirements; and two, introducing a new requirement for family offices to invest at least 10%, or S$10 million, of their assets, whichever is lower, in local investments.

SFOs often start with small teams of investment professionals. Hence, the more meaningful way to create local jobs is through their positive spillover effects in creating demand for ancillary services like legal, custody and tax services and fund administration. As elaborated in this House previously, Government agencies are developing initiatives to tap the growing interest from family offices to provide capital to support enterprise financing, environmental, social and governance investments and philanthropic activities.

MAS will continue to review the fund tax incentive schemes to ensure that they are relevant and that SFOs can contribute meaningfully to Singapore as they set up their presence here.

I thank the Minister of State for his reply. I have two supplementary questions. First, does MAS have the regulatory powers to oversee family offices to prevent tax evasion and fraud? Second, will the Government consider having the employment of Singaporeans as a hiring requirement for family offices for local job creation?

I thank the Member for his supplementary question. Family offices do open accounts with banks in Singapore, and MAS requires all banks operating in Singapore to put in place robust controls to detect and defer the flow of illicit funds. These controls include rigorous processes to identify customers, understand the intended purpose of account opening, evaluate the risks posed and monitor the accounts on an ongoing basis for suspicious activity. Since 2018, Singapore has activated over 70 relationships with countries to share tax-related information. Though these relationships, tax authorities will be able to get information through financial institutions of account holders who are their tax residents. These reaffirm Singapore's commitment to international standards on transparency and cross-border tax cooperation to deter tax evasion.

On the Member's other question, I would like to respond that SFOs are set up to manage the family's own monies. And thus, it is reasonable for the families to have the discretion to make their own decisions on who to hire to manage their families' investments. Further, family offices often invest in globally diversified assets which may require knowledge of overseas markets; and fundamentally, not imposing a requirement to hire locals is to allow family offices the same ability to make hiring decisions that are based on merit, similar to other employers.

Nonetheless, it is our objective to create good jobs here and to give our locals the best chance to take up those jobs by investing heavily in their capabilities and skills. To equip locals with skills relevant to family offices, MAS has partnered with industry experts and the Institute of Banking and Finance to launch three skills maps for the family office sector in 2020 and 2021.

These skills maps set out capabilities that family office employees, management and external service providers should possess, including in new technical skills and competencies for family governance and philanthropy advisory. These skills maps are used by training providers such as our Wealth Management Institute and the Singapore Management University Business Families Institute to develop relevant training programmes, with co-funding of training fees provided for Singapore Citizens and Permanent Residents. The Wealth Management Institute, for instance, aims to train more than 5,000 professionals via its family office programmes by 2025.