Revised Tax Incentive Schemes for Funds in Singapore

Posted by Written by Ayman Falak Medina Reading Time: 4 minutes

On January 1, 2025, Singapore introduced major updates to its fund tax incentive schemes, aimed at aligning with global tax standards and enhancing its status as a financial hub. These revisions, outlined in the Monetary Authority of Singapore (MAS) Circular FDD Cir 10/2024, focus on Sections 13O, 13U, and the newly introduced 13OA of the Income Tax Act, alongside extensions to GST remission and withholding tax exemptions.

The changes are designed to attract high-value investments and bolster the Single Family Office (SFO) sector, which manages significant assets—often exceeding S$1 billion (US$731 million). With more than half of Asia’s family offices based in Singapore, these updates reinforce the nation’s leadership in wealth and asset management.

Updates to Section 13O: Strengthening resident fund incentives

What is Section 13O?

Section 13O provides tax exemptions for Singapore-resident funds managed by local fund managers, encouraging economic activity and investment in the country.

Key changes in 2025

  • Minimum AUM requirement: Funds must now maintain a minimum AUM of S$5 million (US$3.6 million) in Designated Investments (DI) by the third year of the incentive, compared to no prior AUM condition.
  • Local business spending (LBS): Tiered spending requirements now range from S$200,000 (US$146,000) to S$500,000 (US$365.000) annually, based on the fund’s AUM.
  • Investment professionals (IPs): A new mandate requires at least two investment professionals to be employed throughout the fund’s basis period.
  • Removal of new company condition: Funds applying under Section 13O no longer need to be newly set up, removing a significant barrier for existing funds seeking incentives.
  • Waiver of the 30/50 rule: Previously, non-qualifying investors (e.g., Singapore companies) were restricted from owning more than 30 percent or 50 percent of a Section 13O fund’s issued securities. Effective YA 2025, this restriction no longer applies to trusts and unit trusts incentivized under Section 13D.

Existing funds have a grace period until the financial year ending in 2027 to comply with these new conditions.

Enhancements to Section 13U: Elevating standards for larger funds

What is Section 13U?

Section 13U, catering to larger institutional funds and high-net-worth individuals, offers tax exemptions to non-resident funds managed by Singapore fund management companies (SG FMCs).

Key changes in 2025

  • Higher AUM Threshold: Funds must now maintain a minimum AUM of S$50 million (US$36.5 million)in DI, a marked increase from previous thresholds.
  • LBS adjustments: Similar to Section 13O, spending requirements are tiered based on AUM, ensuring substantial economic contributions.
  • Flexibility in investment strategy: Funds under Section 13U are no longer restricted to following only the investment strategy pre-approved by MAS, granting managers more operational freedom.
  • Closed-ended funds flexibility: Closed-ended funds can meet their AUM and LBS requirements on a cumulative basis, with waivers applying from the sixth and eleventh incentive years, respectively.

Inclusion of Section 13D for Non-Resident Funds

What is Section 13D?

Section 13D provides tax exemptions to non-resident funds managed by Singapore-based fund managers, serving as a cornerstone in Singapore’s strategy to attract global capital. This scheme ensures that income derived from Designated Investments (DI) is exempt from tax, provided the fund meets key conditions.

Revised framework in 2025

  • AUM Requirements: Section 13D funds must maintain a minimum AUM of S$5 million in DI, ensuring alignment with Sections 13O and 13U for consistency across schemes.
  • Local business spending: The LBS framework for Section 13D has been harmonized with other schemes, requiring tiered spending between S$200,000 and S$500,000 annually, depending on the fund’s AUM.
  • Clarification on the 30/50 Rule: MAS has clarified that trusts and unit trusts incentivized under Section 13D are exempt from the 30/50 rule starting YA 2025, promoting greater flexibility for fund structures.

These revisions position Section 13D as a competitive option for attracting international funds while meeting global tax compliance standards.

Introduction of Section 13OA for limited partnership funds

What is Section 13OA?

The 13OA scheme extends tax exemptions to funds structured as Limited Partnerships (LPs) in Singapore. This addition supports private equity and venture capital investments, offering more flexibility in fund structuring.

Key criteria

  • AUM Requirement: Similar to Section 13O, LP funds must meet an AUM threshold of S$5 million in DI.
  • Local economic contributions: LBS requirements are similar to those of other schemes, ranging from S$200,000 to S$500,000 annually.
  • Investment Professionals: At least two investment professionals must be employed.

Benefits for closed-ended funds

Closed-ended funds, which operate on a fixed investment timeline, now enjoy tailored tax treatments under the revised framework. These funds must meet the S$50 million AUM requirement annually for the first five incentive years, after which the requirement is waived. Additionally, local business spending (LBS) obligations can be fulfilled cumulatively over the first ten years, providing greater operational flexibility. These requirements are then waived from the eleventh year onward.

The tax incentive award remains in effect until the fund enters its divestment phase or completes 20 years, whichever comes first. These changes reflect Singapore’s responsiveness to industry needs, offering a pragmatic approach to support the unique lifecycle of closed-ended funds while maintaining economic substance.

Streamlined application and administration

MAS has introduced a digital portal to streamline the application process for fund tax incentives. This portal simplifies compliance, reduces administrative burdens, and enhances transparency, ensuring funds can efficiently navigate the revised framework.

Sustaining Singapore’s leadership in wealth management

The 2025 revisions to Singapore’s fund tax incentive schemes underscore the nation’s commitment to fostering a robust, competitive, and transparent financial ecosystem. By raising economic thresholds, removing restrictive conditions, and offering tailored schemes like 13OA, Singapore continues to attract global investors and family offices alike.

About Us

ASEAN Briefing is one of five regional publications under the Asia Briefing brand. It is supported by Dezan Shira & Associates, a pan-Asia, multi-disciplinary professional services firm that assists foreign investors throughout Asia, including through offices in Jakarta, Indonesia; Singapore; Hanoi, Ho Chi Minh City, and Da Nang in Vietnam; besides our practices in China, Hong Kong SAR, India, Italy, Germany, and USA. We also have partner firms in Malaysia, Bangladesh, the Philippines, Thailand, and Australia.

Please contact us at asean@dezshira.com or visit our website at www.dezshira.com and for a complimentary subscription to ASEAN Briefing’s content products, please click here.