Super-Rich Families Face Longer Wait for Tax Breaks in Singapore

SIGNING up to be super rich in Singapore has rarely taken this long.

Family offices attempting to register for tax exemptions in the city-state are facing waits of at least eight months compared with about half that time a year ago, according to people familiar with the matter.

Interest from newly established entities has added to the surge in applications seen over the past year, the people said, asking not to be identified because the information is confidential. While creating family offices – organizations that invest the money of wealthy individuals – doesn’t require a license in Singapore, they do need approval from the Monetary Authority of Singapore to get valuable tax breaks.

Singapore has worked hard to attract some of the world’s wealthiest clans; its low taxes, relative safety and gradual re-opening of its borders have made it an ideal haven. But with demand soaring over the past year – especially among Chinese entrepreneurs and their heirs – it’s started introducing new rules and taxes that could winnow the field.

Singapore had around 400 family offices at the end of 2020, according to MAS estimates, including the likes of Google co-founder Sergey Brin and hedge fund billionaire Ray Dalio.

“Over the past few years, the number of family offices in Singapore has grown, in line with the growth of family offices globally,” a MAS spokesperson said in an emailed response to Bloomberg queries. “In the past four months, we have approved more than 100 applications.”

Two service providers said a large number of submissions were lodged in mid-April when the MAS changed its rules for tax exemptions with a one-week grace period. What had been known as “13X” and “13R” became “13U” and “13O” respectively – with both including stricter requirements on assets under management, minimum local spending and the number of employees at the firm.

In addition to demanding S$200,000 ($145,000) in annual spending, the newly renamed “13O” regime requires organizations to have at least S$10 million in assets under management at inception, rising to S$20 million within two years. It also needs at least two investment professionals to eventually work for the firm.

The tougher stipulations triggered a rush of applications trying to beat the April 18 deadline, according to the people at different companies that helped submit applications for their clients.

“All tax incentive applications are assessed thoroughly by MAS to ensure the business substance of the applicants and the continued quality of the family office ecosystem in Singapore,” the MAS spokesperson said. “In certain cases, applications that are incomplete or unclear may take longer to process.”

“MAS has and will continue to enhance the application experience where possible, by simplifying and automating the process, and factoring in market feedback,” the spokesperson added.

With the tax benefits backdated to the time of application for successful lodgers – and Greater China’s Covid-19 woes prompting residents to think about moving – the backlog is unlikely to deter cashed-up families from creating investment houses in Singapore, where the costs of rentals, mansions and luxury cars have risen sharply.

Family offices are just one of the varied investment vehicles that are increasingly interested in Singapore. The total value of all assets under management based in the tiny country reached S$4.7 trillion by the end of 2020. – Bloomberg