Singapore expands tax incentives for single-family offices

The central bank will make adjustments in five areas of the tax incentives landscape for SFOs.

The Monetary Authority of Singapore will broaden the scope of its tax incentives for single-family offices (SFOs) to encourage them to “deploy capital more purposefully to benefit the Lion City and the region, as well as increase contributions towards the environment and social causes.”

In his speech, MAS Managing Director Ravi Menon said the central bank will make adjustments in five areas of the tax incentives landscape for SFOs.

The first adjustment is to include blended finance structures in the scope of eligible investments for tax incentives.

“We will encourage SFOs to participate in blended finance structures, including those which support the region’s transition to net zero,” Menon said.

To support this goal, MAS will give more recognition to concessional capital invested in such blended finance structures and recognise grants that SFOs give to support blended finance structures.

“For every dollar of concessional capital invested, we will recognise it as equivalent to up to $2 of investments to assess if the SFO has met its investment requirement,” Menon said.

In a bid to encourage SFOs to invest in climate-related projects, MAS will begin to recognise its climate-related investments anywhere in the world and not limited to Singapore.

“Climate change is a global problem that is not bounded by national borders.  As a low-lying island state, Singapore is particularly vulnerable to climate change. We should thus recognise all efforts made to address climate change issues,” Menon said.

For more SFOs to invest in Singapore companies and the local equity market, MAS will expand the scope of the tax incentives to include all investments in non-listed Singapore operating companies, including private credit, and not just private equity investments.

The central bank will also recognise twice the amount invested in Singapore-listed equities, and in eligible Exchange Traded Funds (ETFs) and unlisted funds which invest primarily in Singapore-listed equities, for purposes of meeting the SFO’s investment requirement.

Another adjustment that MAS will introduce is to require SFO applicants to have at least hire one investment professional that is a non-family member and to meet business spending requirements solely from spending locally unlike previously when this could be met with overseas spending.

These enhancements will encourage SFOs to “contribute more to job creation and value creation for the Singapore ecosystem,” said Menon.

To encourage SFOs to conduct philanthropic activities through Singapore, both locally and overseas, MAS will begin recognising donations to local charities alongside normal business spending.

To further support this goal, MAS will also launch the Philanthropy Tax Incentive Scheme (PTIS) for family offices on 1 January 2024.

The scheme will “allow qualifying donors in Singapore to claim 100% tax deduction, capped at 40% of the donor’s statutory income, for overseas donations made through qualifying local intermediaries.”

“We hope the introduction of PTIS will encourage philanthropic giving to become a regular, professional feature of family offices here,” Menon said.