Author: Lawyer Jing Xinyue Zhang Chinese Lawyer｜Singapore Registered Foreign Lawyer
Note: Zhongxin Legal News has previously published articles including Explainer｜A Singapore Family Office Is More Than an Immigration Project, The “Cool” Combination of a Singapore VCC, 13R/13X and a Family Office, and Matters to Consider When Establishing a Family Office in Singapore. Those articles introduced the advantages, structural design, formation process and key considerations of Singapore family offices, as well as the relationship between family offices and immigration. Readers have continued to ask about the set-up, operating and maintenance costs of a Singapore family office. This article focuses on that practical question.
01 Investment amount
- For a family office applying for the 13R tax exemption, the Monetary Authority of Singapore does not impose a minimum investment amount. We nevertheless generally recommend that the investor commit at least S$5 million.
- For a family office applying for the 13X tax exemption, the minimum asset size is S$50 million.
02 Set-up costs
- Advice on and design of the family-office structure;
- Incorporation of the family-office company;
- Applying for an exemption from the fund-management licence requirement for a single-family office, or applying for a fund-management licence for a multi-family office; and
- Applying for the 13R or 13X tax exemption.
These are the principal up-front steps and expenses required to establish a family office. The overall fee depends on the complexity of the structure and the client's requirements and should be agreed on a case-by-case basis.
03 Operating and maintenance costs
- Fund-management fees: Salary paid to the fund manager each quarter, or a management fee calculated by reference to assets under management;
- Company-secretarial fees: Annual fees paid to the corporate secretary; and
- Annual business expenditure: The 13R and 13X tax-incentive schemes require the family office to incur at least S$200,000 in annual local business spending. This may be used for office rent, staff salaries, the fund manager's salary or management fee, legal fees, secretarial fees and other professional expenses.
Comparison of the 13R and 13X tax exemptions
04 Is the investment cost of a Singapore family office high compared with other investment-immigration programmes?
Compared with the investment requirements of other popular investment-immigration programmes, the investment required for a Singapore family office is not particularly high. Among the available programmes, Singapore's policy is relatively favourable. In practice, a Singapore family office may also save costs in the following respects:
First, all personnel employed by the company may be family members. This can substantially reduce salary costs. The family office needs personnel with suitable management and work experience; it does not necessarily need to pay high external-market salaries.
Second, the Singapore Government offers an offshore-operating framework for family-office immigration. Singapore's exchange-rate environment can be advantageous, there are no general foreign-exchange controls, and family-office investment returns may qualify for tax exemption. These features can reduce the overall cost.
Third, Singapore's tax system is relatively simple. There is no shareholder dividend tax, value-added tax or estate tax in the usual sense, and a new company may benefit from tax concessions during its first three years. A family office may therefore benefit from these corporate tax policies.
Fourth, the applicant can pursue immigration while establishing and operating the family office. The family can enjoy the advantages available to Singapore companies while obtaining Singapore immigration status.
05 What services does the Zhongxin Legal News team provide?
- Advising on a suitable family-office structure;
- Providing advice on regulatory requirements;
- Assisting with tax planning, immigration and relocation;
- Establishing the family-office legal entity;
- Assisting with tax incentives and communication with the relevant government authorities;
- Applying for financial licences;
- Providing transfer-pricing analysis and other management services for the family office; and
- Advising on family-wealth management after the family office is established. Family members may manage assets themselves, or we can recommend professional fund managers.
Establishing and maintaining a Singapore family office requires the cooperation of several institutions, including a Singapore-licensed corporate-secretarial firm, accounting firm, law firm, private bank and fund-management company. The Zhongxin Legal News team can provide an integrated professional service.
Practical observation
Family offices are often regarded as structures designed for ultra-high-net-worth families. This may be true in other countries, but the threshold in Singapore is not necessarily as high. An applicant does not need to be extraordinarily wealthy. In practice, however, for a client with around S$5 million who wants only an immigration route and has no genuine business or succession purpose, we generally do not recommend establishing a family office solely for immigration. The annual operating expenditure of at least S$200,000 cannot be ignored, and a family office has functions that go well beyond immigration.
At present, people who may be suitable for establishing a family office in Singapore include:
- High-net-worth families or entrepreneurs whose objective is to obtain Singapore PR; and
- People who wish to establish a family office for the family's long-term business continuity and family-members' immigration planning.
For more information about Singapore family offices and immigration, please contact the Zhongxin Legal News professional advisers.
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This article is for informational purposes only and does not constitute formal legal advice.
This article is general information and not legal advice. Specific matters require assessment by appropriately qualified professionals.