Establishing Inbound Family Offices In Singapore

1 IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore Establishing Inbound Family Offices In Singapore Practical Considerations S INGA PORE | HONGKONG 20 YEA RS IN PRA CTICE Shanker Iyer STEP Asia Conference Nov ember 2013 IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore Contents Introduction Tax, Residency & Regulatory considerations for: Single Family Offices Multi- Family Offices CONTENTS 2 IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore INTRODUCTION Est ablishin g I nbou nd Family Of f ices I n S ingapore 3 IYER PRACTICE IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore INTRODUCTION What is a Family office ?

2 Single Family office vs. Multi Family office Recent trends in Singapore Factors to consider when setting up a Family office INTRODUCTION 4 IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore INTRODUCTION Family office : An organisation who assumes day-to-day administration and management of a Family s affairs. 5 IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore What is a Family office ? Simplest definition: an organisation who assumes day-to-day administration and management of a Family s affairs. In practice, it m eans a lot of different things to different people. Most Family Offices focus on a combination of management of investments, liaison with private banks, tax planning, estate & philanthropic planning Increasingly many also focus on Family governance and su ccessi on planning INTRODUCTION 6 IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore Single Family office vs.

3 Multi- Family office Traditionally Family Offices were single-fam ily Offices , w hich consist of dedicated staff serv ing the broad needs of a single ultra high-net w orth fam ily. This has now broadened to include a wider range of wealthy families, and given the costs of running a single- Family office , the m ulti- Family office concept has become increasingly popular. A m ulti-fam ily office ty pically consists of an organisation which provides inv estment management serv ices to multiple high-net w orth families INTRODUCTION 7 IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore Recent trends in Singapore Aligned with Singapore s growth as a centre for private wealth and an attractive tax regime, the following has been witnessed.

4 An increase in the number of wealthy individuals from abroad looking to relocate to Singapore and to set-up a structure to m anage their w ealth Foreign professionals (typically with a banking background) looking to set-up multi- Family office ty pe structures to prov ide w ealth m anagement solutions to high-net w orth clients in South-East A si a An increase in law firms and trust companies to support the abov e activ ity INTRODUCTION 8 IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore When looking to set up a Family office in Singapore , need to consider: Tax Implications Residency Options Regulatory Rules Other Considerations INTRODUCTION 9 IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore SINGLE Family Offices Est ablishin g I nbou nd Family Of f ices I n S ingapore 10 IYER PRACTICE IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore High-net worth individuals seeking to relocate to Singapore are typically exploring 2 options.

5 Assets held in Personal Name, with staff hired either through a sole-proprietorship or a separate entity Assets held through a Company, which then hires the necessary staff to support the Family office SINGLE FA MILY Offices 11 IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore Taxation Consider tax treatment of both holding assets in either personal name or com pany for: Dividend Income Interest Income Capital Gains NB: This also applies to offshore companies which are managed and controlled from Singapore & hence could be Singapore tax resident. SINGLE FA MILY Offices 12 IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore Taxation - Dividends Personal Name Co mpa ny Divide nds f ro m S ingapo re co mpanie s Div idends from Singapore companies are exempt under the one-tier tax sy stem Divide nds fro m overseas c o mpa n ie s Exempt Exempt under Foreign Sourced Income Exemption when remitted ( subjec t to qualify ing c o nditio ns)

6 SINGLE FA MILY Offices 13 IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore Taxation - Interest Personal Name Co mpa ny Int erest fro m S ingapo re Exempt if from a bank or finance company approv ed by MAS Taxable Int erest fro m overseas Exempt Taxable if remitted or deemed remitted into Singapore SINGLE FA MILY Offices 14 IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore Taxation - Gains Personal Name Co mpa ny No Capital Gains Tax BUT Gains may be assessed as trading inc ome and henc e taxed As with Personal Name, but there are laws or incentiv es whic h c an giv e certainty SINGLE FA MILY Offices 15 IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore Law & Incentive Schemes Using a company has an advantage in that it can give certainty: Capital Gains safe harbour rules Enhanced Tier Fund Scheme SINGLE FA MILY office TA XA TION 16 IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore Capital Gains Safe Harbour In the 2012 budget, the government introduced safe harbour rules for capital gains.

7 Gains upon disposal of an equity investment are guaranteed not to be treated as trading income provided: The investment was held through a company The inv estment represented at least 20% of the underlying company The inv estment was held for at least 2 years This safe harbour rules are in place for disposals made until May 2017 SINGLE FA MILY office TA XA TION 17 IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore Designed for funds, but can be used for Family office companies Administered by MAS need to make application If below guidelines are met, specified income (including trading gains) from designated inv estments could be exempt.

8 Must hav e at least S$50m in assets Must be managed by a licensed, registered or exempted fund manage me nt co mpany V ehicle must be administered by a Singapore fund administrator Must hire at least 3 people each earning greater than S$3,500 per month Must incur at least S$200,000 in annual business spending SINGLE FA MILY office TA XA TION 18 Enhanced Tier Fund Scheme IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore Where assets are held by a trust: Where neither the settlor nor beneficiary is a Singapore resident or citizen, then the trust is a Qualify ing Foreign Trust Specified Income from Designated Investments (including gains) are tax exempt Inc ludes inc ome deriv ed by an eligible holding c ompany (one of w hose c onditions is that it s not inc orporated in Singapore ) Where there is a resident indiv idual settlor, the trust can be a Qualify ing Domestic Trust (prov ided the settlor isn t sole beneficiary )

9 S ing a p o re-sourced investment income and foreign sourced income is exempt A lso applies to holding c ompanies under the trust Intention is to mirror rules for inv estments held by resident indiv iduals The abov e are subject to further conditions SINGLE FA MILY office TA XA TION 19 Assets held in a trust: IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore Residence 2 main options for residence in Singapore : Permanent Residence Employment Pass SINGLE FA MILY office 20 IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore Permanent Residence Applies to either hold ing assets in personal name or through a c o mp a ny Financ ial Inv estor Sc heme no longer exists Global Investor P ro g ra mme available.

10 But high barrier to entry Must inv est at least S$ in a new business or designated fund Must hav e a substantial business track reco rd R egular PR proc ess is long and not usually open to non-residents of S i ng a po re SINGLE FA MILY office - RESIDENCE 21 IYER PRACTICE Est ablishin g I nbou nd Family Of f ices I n S ingapore Employment Pass: Only applicable to those holding assets through a company, though the individual could opt to set-up a separate company for employment purposes Employment Passes are available to candidates with appropriate qualifications & experience MOM will also look at salary and share capital of the company Recent Fair Consideration Framework advertising rules will (from August 2014)