INSIGHTS invited Sim Mong Teck & Partners to share a snapshot of their investment immigration observation and outlook for 2018 and 2019.
It is no secret that Asia has been leading the way in terms of wealth creation and growth in recent years. As such wealthy Asian families continue to grow in size and complexity, business and wealth preservation as well as continuity come to mind. This is where proper succession planning becomes increasingly important to these Asian high net worth and ultra-high net worth families. As a result, we have observed an increase in Hong Kong and China clients coming to Singapore to set up family offices, as a centralised platform to carry out their long-term family and wealth management vision(s). This is in no doubt due in large part to Singapore’s safe and stable political and regulatory environment. Another significant allure of Singapore is the attractive tax exemption schemes for managing funds run by family offices based in Singapore (more about this later).
Other than the usual benefits that setting up a family office provides, another less but increasingly known benefit of setting up a family office in Singapore can bring is the possibility of gaining Permanent Residency (PR) via the Global Investor Programme (GIP) administered by the Economic Development Board (EDB). An alternative to the Global Investor Programme is via tax incentive schemes under the Singapore Income Tax Act (SITA), which will avail the successful applicant to Employment Pass(es) (EP). Another attractive direct benefit to obtaining Permanent Residency and Employment Pass(s) is the establishment of tax residency in Singapore (subject to tax residency requirements being fulfilled).
The Global Investor Programme – Permanent Residency
Under the Global Investor Programme (which is an investment immigration scheme), there are three (3) options, namely:
- Option A – investment through a business;
- Option B – investment in an approved venture capital fund; and
- Option C – Single Family Office
In summary, the general requirements are:
- Requirement 1 – possess three (3) years of successful entrepreneurial and business track record;
- Requirement 2 – Invest at least S$2.5 million in Singapore;
- Requirement 3 – applicant’s company must have an annual turnover of at least S$50 million in the most recent year, and at least S$50 million per annum on average for the last three (3) years;
- Requirement 4 – if the applicant’s company is privately held, the applicant must have at least 30% shareholding in the firm; and
- Requirement 5 – the applicant’s company must be engaged in one or more of the industries approved by the EDB.
However, for the GIP Family Office option, the applicant must have at least five (5) years of business or investment track record and a direct family net worth of S$400 million, in addition to the S$2.5 million in paid-up share capital. The Single Family Office is required to have assets under management (AUM) of at least S$200 million.
A successful application under any of the above options will entitle the applicant and his/her family members to Permanent Residency in Singapore (subject to further guidelines).
Fund Incentives under the Income Tax Act – Employment Passes
As alluded to above, more of our Hong Kong and China clients are also looking at the fund incentive schemes as an alternative under Sections 13X and 13R of the Singapore Income Tax Act (Cap 134) (SITA), which are administered by the Monetary Authority of Singapore (MAS). This is because a successful application under Section 13X of the SITA (other than the attractive tax incentives – which we can advise further) will allow the applicant (subject to approval by relevant authorities) to apply for three (3) employment passes (including the applicant). While, a successful application under Section 13R of the SITA will allow the applicant (subject to approval by relevant authorities) to apply for one (1) employment pass for him/herself.
Currently, the most popular scheme with our clients is the Section 13X of the SITA, as the qualifying requirements are much lower than the Option Single Family Office under the Global Investor Programme. In summary, the qualifying requirements under Section 13X of the SITA are as follows:
- Requirement 1 – fund AUM must be at least S$50 million;
- Requirement 2 – Must incur at least S$200,000.00 in local business spending (which can include management fees, remuneration & other operating costs); and
- Requirement 3 – Singapore based fund administrator where fund is incorporated in Singapore.
As for Section 13R of the SITA, this is also an increasingly popular scheme as there is no restrictions as to the minimum fund size, i.e. no minimum fund AUM requirements. Requirements 2 and 3 above in relation to Section 13X of the SITA will still apply. Finally, both the Section 13X and 13R of the SITA schemes will require approval from the MAS.
Article contribution: Sim Mong Teck & Partners. Established in 1994 by Mr Sim Mong Teck, the firm is a dynamic boutique size commercial practice whose core philosophy is to provide practical and cost effective legal service.
Photo credit: Changi Airport Group