Usual family office structure in Singapore –  3 Types for your consideration

Usual Family Office Structure in Singapore : In recent days, Singapore has mounted one of its largest police raids on money laundering in Singapore and 10 people were arrested and over S$1 billion in cash and assets was seized and put under policy custody.  All this attests to the status of Singapore as one of the world’s global private banking hubs.  Singapore has attracted a lot of private wealth and many of these business families choose to set up a family office in Singapore to manage such wealth.

In this article, we will highlight three of the usual family office structures in Singapore that wealth managers can consider setting up for such high net-worth families.

Usual Family Office Structure in Singapore – #1 Single Family Office Structure

We have covered the usual structure of a single family office in our previous post but to summarise, a single family office usually comprises of 2 entities.  One acts as a fund manager (or the investment manager of the structure) and the other is the investment company that makes investments.  Most people will apply for a S13O or S13U tax break under the Income Tax Act 1947 of Singapore. 

Under this single-family-office structure, the fund entity pays 0% tax while the family office (exempt fund manager) will pay tax.  Special tax conditions are appliable for S13O or S13U tax incentive applications.

Pros of the Single Family Office

– No Tax for the fund entity

-Can train the second generation of the family to manage wealth

-Is a separate operating entity in Singapore and the family can manager money from Singapore (banks are increasingly clamping down on trading companies without any economic substance that are based in Singapore and need to see employees actually being hired by the entity due to increase in money laundering risks for banks to monitor)

Cons of the Single Family Office

-No independence from the business family (so liable for tax in the home country and can be potentially subject to lawsuits by potential creditors)

-Not intended to be used to hold an operating business or a controlling stake of a business in a listed company.

-Not much corporate governance so assets and wealth cannot be transferred more than one generation

Usual Family Office Structure in Singapore- #2- Single Family Office Structure with Global Investor Programme

This option involves having the single-family office plus the global investor programme (application for permanent residence for the business family).  

Assuming that the family office can qualify for the single family office tax incentive under Option #1 above, the family can consider increasing the assets managed from Singapore to S$200 million (current requirement and subject to change by the Economic Development Board) and the family can potentially apply for permanent residency under the family office option of the Global Investor Programme. 

Given that this is intended to be an upsized version of the Single Family Office, the cons of the Single Family Office will still apply.

Usual Family Office Structure in Singapore  – #3- Premium Family Office

This option involves, amongst other things, the use of an asset protection structure and can be used to acquire global assets.  This structure can be used to acquire global operating assets and is very useful when the founder has many assets globally and his second generation are also residing globally as it can help contain the tax exposure of the underlying operating business.  This structure can also allow for multi generation asset transfer.

For founders who intend to restructure their operating and non-operating assets under one platform, this is the structure that can be used for this purpose.  The minimum assets under management required for this structure is USD 20 million.

In conclusion, there are three usual family office structures that families can consider setting up and it really depends on the requirements of the business family. 

The first option is more suited for those who wish to set up a private banking account but have no connection with Singapore. 

The second option is an upgrade of option one but allows the applicant to apply for permanent residency in Singapore. 

The third option allows for global assets to be managed and allows for multi generation asset transfer and containment of tax exposure for the family.

If you need Private Client Legal Services to set up a Single Family Office in Singapore, do click here to schedule a complimentary meeting with our Private Client Legal partner who can look into your specific requirements.       https://www.SingaporeLegalPractice.com is a corporate law and commercial law educational website headquartered in Singapore which aims to demystify business law and 新加坡商业法 for SME Company Owners, Startup Founders and 新加坡新移民老板。The information provided on this website does not constitute legal advice.  Please obtain specific legal advice from a lawyer before taking any legal action.  Although we try our best to ensure the accuracy of the information on this website, you rely on it at your own risk.  Click here to signup for our newsletter today to be kept updated on the latest legal developments in Singapore.