Tightens Rules On Family Offices

Singapore Tightens Rules On Family Offices

SINGAPORE – The stricter rules on family offices, through which affluent families oversee their fortunes, may affect the city-state’s attractiveness to the super wealthy, according to an opinion piece published on Bloomberg on Friday morning (6 May, SGT).

Starting on 18 April 2022, family offices will need to comply with stricter rules to be able to enjoy tax-exempt incomes in Singapore. For instance, their fund needs to be a minimum of S$50 million. S$10 million or 10 percent of their fund, whichever is lower, also need to be invested in Singapore-listed securities or domestic start-ups. Previously, there was no requirement for local investment.

Depending on their size, family offices are also required to spend S$500,000 to S$1 million in Singapore’s local economy per annum, up from S$200,000 previously. Of the minimum three investment professionals they need to hire, at least one must now be a nonfamily member.

“To ask the moneyed to splurge more on hiring local talent, renting office property and buying Singapore assets is a bold move,” commented Bloomberg Opinion columnist Andy Mukherjee, who previously worked for The Straits Times.

“Singapore had the perfect opportunity to lure away billions of dollars of wealth from Hong Kong, whose isolationist approach to COVID-19 and a Beijing-imposed national security law are sapping confidence in the financial centre. Yet, the city-state is moving in the opposite direction. Its freshly tweaked tax policies are sending a signal to the rich: ‘Your money is welcome if you treat us less as a hotel, and more like home.’”

He pointed out that while the super affluent had a great 2021, they are also impacted by the ongoing war in Ukraine, the overextended global supply chains, the slowdown in China, languishing tech stocks, and a hawkish US Federal Reserve, which are all dragging down investor sentiment.

“When it comes to expanding, notoriously opaque family investment vehicles that are believed to manage in excess of US$4 trillion worldwide — more than hedge funds — won’t be immune to the heightened uncertainty,” he explained.

Furthermore, Hong Kong will still put up a fight to attract family offices. The Chinese city plans to offer its own tax exemptions in 2022 for family offices that oversee HK$240 million (US$30 million) or more, hire at least two professionals, and spend at least HK$2 million per year.

“It’s a generous deal, which might start looking attractive once the city eases up on foreign travel,” added Mukherjee.

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