Although Singapore High Net Worth individuals (HNWIs) and related wealth are respectively 18% and 238% less than in Hong Kong (Wealth Insight), the singapore asset management industry keeps growing and is expected to become the most important wealth management centre in Asia. While there is not such a big difference between these two financial hubs, let’s have a look at what makes Singapore such an attractive place for wealth owners and managers.
Attractive tax exemption schemes
Singapore tax system offers tax income exemption to both offshore and onshore funds managed by Singapore based fund managers.
- To benefit, offshore funds must not to be resident in Singapore and not owned 100% by Singapore tax residents.
- Restrictions also apply as per the percentage of Singapore resident investors in the fund: for both schemes, a financial penalty can be applied above a certain percentage (30%).
In addition to the offshore and Singapore resident schemes, the enhanced tier fund scheme was introduced in order to provide fund managers with similar tax exemption but greater flexibility: no restriction on the percentage of Singapore investors in the fund and fewer restrictions over the choice of fund’s residence. The latter requires however previous approval from the MAS and specific conditions such as a minimum fund size of USD50M.
And additional features that definitely make Singapore an attractive fund’s domicile..
While the offshore and enhanced tier fund schemes can still appeal to fund managers willing to domicile funds in other jurisdictions, specific features definitely provide additional incentive to set up funds in the Singapore:
- Access to Singapore large tax treaty network (over 70 countries), allowing funds to benefit from attractive tax rebates when investing in different parts of the world.
- Dividend payments from a Singapore based fund are tax-exempt.
- Fund management incentive providing a concessionary tax rate of 10% for fund management and investment advisory activities subject to certain conditions (such as a minimum USD250M Assets under Management);
- Singapore’s robust legal system and recent inauguration of the SICC (Singapore International Commercial Court) provides additional comfort to wealth owners and position Singapore as an international dispute hub.
Rising pool of emerging wealth in Asia ….and elesewhere
According to Credit Suisse 2014 Wealth Report, the US and UE remained the wealthiest regions in the world in 2014 (USD91trillion and USD85trillion respectively as of 2014). Asia Pacific is however gaining ground very quickly reaching a confortable 3rd rank (USD75trillion including China and India). Most forecasts actually estimate that Asia will have closed the gap or even overtaken the US over the next decade if not earlier.
Less well-known, Sub-saharian Africa is gradually building up, revealing an increasing amount of wealth, without mentioning emerging european countries and Latin America.
Singapore global ambitions
All in all, Singapore has been building a convenient and attractive framework that will definitely support the even growing need for wealth management advisory in South East Asia. But Singapore’s attractiveness as asset management hub shouldn’t be limited to South East Asia as the tax and legal environment provided by the city could also appeal to wealthy individuals from emerging Europe, Middle East and Africa. As a matter of fact, Taurus Wealth Advisors, a Singapore based multi-family office recently applied for a license to operate in the Middle-East with the ambit of gaining access to African clients. A sign among others that the City’s limited territory doesn’t match with its unlimited potential and ambitions ..
Sources: Wong Partnerhip -Wealth Insight – BCG – PWC- Credit Suisse Global Wealth