Strengthening Singapore’s position as a hub for family offices

THE global landscape of family offices is experiencing unprecedented growth. According to the World Ultra Wealth Report, in 2023, the global ultra-high-net-worth (UHNW) population grew by 7.6 per cent to a high of 426,330 individuals. This surge is driven by increasing wealth accumulation among high-net-worth (HNWs) and UHNW individuals.

This proliferation coincides with a significant intergenerational transfer of wealth. According to Wealth-X, US$18.3 trillion of collective wealth globally will be transferred by 2030, of which around US$2.5 trillion will be handed over in Asia. As older generations pass on their assets, younger family members are increasingly turning to family offices to manage their inherited wealth efficiently and sustainably.

Governments across the Middle East and Asia – such as Hong Kong, Dubai, Malaysia and Indonesia – are capitalising on this trend by introducing tax incentive schemes to attract family offices to their jurisdictions.

Singapore has promoted its status as a family office hub since 2018. Both a global business hub and wealth management centre with high liveability, Singapore is an attractive location for wealthy individuals to set up single family offices. From just 400 single family offices awarded tax incentives by the Monetary Authority of Singapore (MAS) in 2020, this number has grown five times by the end of 2024.

Evolving measures to welcome new family offices

Singapore continues to finetune its measures to remain attractive to quality family offices from around the world. One such initiative was the introduction of third-party screening reports as a requirement for tax incentive applications. This reduces the time required by MAS to conduct such screenings internally, giving them more time to focus on other aspects of the application while ensuring high standards by appointing screening service providers to run independent checks.

At the same time, the authorities introduced new revisions to tax incentive schemes for licensed fund managers and single family offices for greater ease of administering these schemes. These include the change from using net asset value previously, to using the value of designated investments to compute the minimum assets under management for funds receiving tax incentives. The change allows family offices more flexibility to fund the investments.

Single family offices can also expect greater efficiency when applying for tax incentives with the introduction of a Web-based portal that makes it easier for tax advisers to submit applications and annual declarations on behalf of the family offices. It also allows for the tracking of application status and relevant communications, and new applications can be submitted directly – without the requirement of a preliminary round of approval.

Opportunities to anchor strategic advantage

With the Singapore Budget 2025 next week, and looking at the new requirements for tax incentives coming into effect in 2025, there are opportunities for Singapore to further support the growth of the family office ecosystem to cement the country as a leading global hub for family offices.

For a start, Singapore can consider including insurance products in the definition of designated investments for the single family office tax exemption schemes. Insurance products currently do not qualify as designated investments, which limits their use in family office structures presently.

Insurance products typically pay out directly to family members when a trigger event occurs, allowing the funds to be paid without going through the probate process typically applicable to will arrangements. Insurance products also allow investments to be accumulated for growth to enable future inter-generational transfers. By including insurance products as designated investments, Singapore can encourage more family offices to invest in insurance products, thus increasing the demand for insurance services in the country and boosting investment activity in the broader financial sector.

Another way to strengthen Singapore’s advantage is to allow single family offices to manage their assets using the variable capital company (VCC) legal entity, which is currently limited to use only by MAS-licensed fund managers. If permitted, the VCC could allow a family to segregate assets and liabilities belonging to different family sub-units, while being managed collectively in a single structure in a cost-efficient manner. Families that can benefit from a VCC also tend to be more sophisticated and manage assets of a larger scale, and they help to raise the level of professionalism when they choose to set up in Singapore.

Finally, with cryptocurrency investments becoming mainstream and more family offices investing in the asset class, it may also be useful for the authorities to start considering how such investment flows can be captured in Singapore in a prudent and practical manner, such that our incentive schemes are in line with global investment trends.

With the strong growth numbers, it is clear that Singapore is an attractive location for family offices. However, with other markets also eagerly looking to capture a slice of the family office pie, Singapore will need to continually refine its policies to remain relevant and competitive – and the upcoming Budget announcement presents a timely opportunity to do so.

Desmond Teo is EY Asean private tax leader and Spencer Hsu is associate partner, private tax services, EY Corporate Advisors

The views here are the writers’ and do not necessarily reflect the views of the global EY organisation or its member firms