The Monetary Authority of Singapore is set to refine three fund tax incentive schemes from January 2025 as part of the move to enhance the fund sector.
Three fund tax incentive schemes in Singapore will see refinements and further extension with effect from January 1, 2025, in a move that seeks to enhance the city-state’s international financial hub status, according to the recently released Singapore budget.
The Offshore Fund Tax Incentive Scheme under section 13D of the Income Tax Act (ITA) 1947, the Resident Fund Tax Incentive Scheme under section 13O of the ITA and the Enhanced-tier Fund Tax Incentive Scheme (under section 13U of the ITA) – will cease to be in force from December 31, 2024 - will be extended by five years until December 31, 2029.
Revising Economic Criteria For Qualifying Funds
As part of the extension, qualifying funds will continue to enjoy the withholding tax exemption on interest and other qualifying payments made to non-resident persons and Goods and Services Tax remission for prescribed funds managed by prescribed fund managers in Singapore.
The economic criteria for qualifying funds under the fund tax incentive schemes will be revised with effect from January 1, 2025. More details are expected by the third quarter of 2024. Some possible revisions include the introduction of a minimum fund size to the Resident Fund Tax Incentive Scheme and/or a step up or increase in business spending commitments by qualifying funds, according to a commentary from law firm Withersworldwide Singapore.
Significant Enhancement
«These changes should not be retrospective and should only apply to funds that submit their final Resident Fund Tax Incentive Scheme or Enhanced-tier Fund Tax Incentive Scheme applications on or after 1 January 2025,» Withersworldwide added.
The firm also pointed out that the revised economic criteria – should there be no grandfathering – may apply to funds that currently rely on the self-executing Offshore Fund Scheme for exemption with effect from 1 January 2025. Funds are therefore advised to apply for exemption under the Enhanced-tier Fund Tax Incentive Scheme, the law firm added.
«The inclusion of offshore funds in the foreshadowed revisions to the economic criteria for qualifying funds is notable because offshore funds are presently exempt from tax without any economic criteria — no minimum AUM, no minimum fund expenditure, no application to or approval from the MAS being necessary at all,» Withersworldwide said. A significant enhancement to the Resident Fund Tax Incentive Scheme effective from January 1, 2025, is the extension of the scheme to limited partnerships registered in Singapore.
Additional Funds for Singapore as a Global Financial Center
«This extension could potentially allow feeder and parallel funds constituted as Singapore limited partnerships with a fund size of less than S$50 million at the point of application to be exempted under the Resident Fund Tax Incentive Scheme,» Withersworldwide said.
As part of the budget announcement, the Singapore government has also committed to injecting SG$2 billion into the Financial Sector Development Fund which will further enhance Singapore’s status as a leading global financial center.
