Developed in collaboration with Deloitte Private, this report aims to provide guidance to stakeholders on how to set up a family office; explain its functions, operational aspects and compliance considerations, and highlight how the features of such a structure can contribute to family business success.

 

Why families choose to set up their family offices in Singapore


Inter-generational wealth transfers and the growing demand for family office


Asia has been at the forefront of wealth creation in the last decade, with China’s billionaires worth $1.3 trillion dollars more in 2021 than the previous year1. With a third of the region’s billionaire population over 70 years old, Asia will also see one of the largest inter-generational wealth transfers2. Around 460 billionaires are expected to pass USD 2.1 trillion to the next generation in the next 20 years. A 2021 report3 indicated that about 60 per cent of wealthy individuals worldwide have reassessed their successions plans since the pandemic, especially among the older generations who have been disproportionately affected by the pandemic-driven market volatility.


As families of substantial wealth grow in size and complexity, succession planning has become increasingly important in achieving business and wealth continuity. To help manage the transition, a growing number of wealthy families in Asia are considering setting up family offices to serve as the focal point of the management of their assets and investments.

What is a family office?

A family office is a professionalised private investment and wealth management entity designed to oversee the day-to-day administration and management of a family’s financial and nonfinancial affairs, with the goal to preserve, grow and transfer wealth on to future generations.


The family office also works with specialists to provide advice on matters such as tax advisory, legal advisory, property and estate management, and lifestyle services. They also facilitate intergenerational family communication, next generation development and philanthropic ambitions.


In essence, a family office is used as a comprehensive approach to professionalising and protecting a family’s wealth.

Why do families choose to set up their family offices in Singapore?

In interactions with our ultra-high net worth clients, many of them indicate their preference to set up their family offices in Singapore. Even those who already have family offices in Europe are looking to set up satellite offices in Singapore.


The choice of location can have significant consequences. It is not simply a location for wealth management, but also a jurisdiction where the stability of the operational environment can best serve and safeguard a families’ interests.


And Singapore checks plenty of boxes in terms of what wealthy families should consider when siting their family office.

1.   Business-friendly environment with political stability and supportive eco-system for wealth management

Singapore ranks first in the world4 in political and operational stability with a high-level of transparency and rigorous standards of governance. The World Bank’s “Doing Business” 2020 report5 ranked Singapore as the second-best economy worldwide for ease of doing business. The International Monetary Fund (IMF)6 also affirmed Singapore’s financial sector oversight as being among the best globally for its ability to strike the right balance between financial innovation and safeguarding financial stability.


The government is keen to attract foreign investors to its shores and the Economic Development Board (EDB) and the Monetary Authority of Singapore (MAS) are both actively looking at ways to continue drawing wealthy investors to the country.


For example, wealthy families can opt to pursue the Global Investor Programme administered by Contact Singapore, a division under EDB, which awards Singapore Permanent Residency to selected investors who invest at least S$2.5 million in Singapore-based family offices that have at least S$200 million net assets under management.


Singapore also offers a wide range of fund vehicles for families – from tax transparent entities such as partnerships, to corporate entities including private limited companies and Variable Capital Companies (VCCs).


Three tax incentive schemes for funds under Singapore’s Income Tax Act (SITA), namely Section 13D, Section 13O and Section 13U, allow for family investment vehicles to enjoy tax exemption on Specified Income derived from Designated Investments. All funds that qualify for tax exemption as of 31 December 2024 may enjoy exemption for the life of the funds7, subject to the relevant conditions of each scheme.


At the same time, Singapore has consistently ranked as the most liveable city for East Asian expatriates8, and various international bodies such as the World Health Organisation and United Nations have ranked Singapore as being among the top nations in terms of its healthcare system9.

2.   Leading financial hub and gateway to Asia

As a major transport, logistics and financial hub, Singapore is a well-established gateway for companies who want to gain access to Southeast Asia and Asia.


The city-state has one of the most extensive of trade agreements in Asia. Family offices established here can also benefit from its wide network of 25 Free Trade Agreements.

3.   Reputable legal and judicial framework

Singapore’s legal and regulatory frameworks are clear and transparent, with a well-respected judiciary. The country ranked 4th in East Asia and the Pacific region, and the 17th best worldwide according to the most recent World Justice Project10.


The establishment of the Singapore International Commercial Court (SICC) in 2015 further bolstered Singapore’s reputation by offering a dispute resolution framework to tackle cross-border and international commercial disputes without having to go through arbitration.

4.   Competitive tax regimes

Singapore has one of the most competitive tax regimes internationally with relatively lower tax rates compared to other countries. Capital gains are not taxable and there is no inheritance tax.


Singapore also has a comprehensive network of more than 90 Double Taxation Agreements (DTAs)11 with the likes of China and Indonesia, which are accessible to the family offices if correctly structured. These would be attractive to families with cross-border family business enterprise.   



References:

1 https://www.forbes.com/sites/giacomotognini/2021/04/06/the-countries-with-the-most-billionaires-2021/?sh=3fcfe544379b

2 https://www2.deloitte.com/content/dam/Deloitte/sg/Documents/tax/sg-tax-business-tax-developments-extension-refinement-tax-incentive-schemes-funds.pdf

3 https://content.knightfrank.com/research/83/documents/en/the-wealth-report-2021-7865.pdf

4 https://www.wipo.int/global_innovation_index/en/2021/

5 https://documents1.worldbank.org/curated/en/688761571934946384/pdf/Doing-Business-2020-Comparing-Business-Regulation-in-190-Economies.pdf

6 https://www.mas.gov.sg/news/media-releases/2019/imf-reaffirms-singapore-financial-sector-oversight-as-among-the-best-globally

7 https://www2.deloitte.com/content/dam/Deloitte/sg/Documents/tax/sg-tax-fund-management-in-singapore-15-sep-2021.pdf

8 https://hrb.com.sg/singapore-remains-worlds-most-liveable-city-for-east-asian-expats/

9 https://edition.cnn.com/2017/09/12/health/un-health-goals-country-ranking-study/index.html

10 https://worldjusticeproject.org/sites/default/files/documents/Singapore_2021%20WJP%20Rule%20of%20Law%20Index%20Country%20Press%20Release_1.pdf

11 https://www.iras.gov.sg/irashome/Quick-Links/International-Tax/List-of-DTAs--limited-treaties-and-EOI-arrangements/

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