The Asian city-state has been moving to attract family offices and, with other jurisdictions experiencing uncertain times, Singapore is well-placed to build credentials in the space. This article takes a look.
(An earlier version of this article appeared late last week in WealthBriefingAsia, sister news service to this one. We know that FWR readers are interested in what is happening in the family offices space outside North America, so we hope the insights here are useful.)
Singapore has big potential as a hub for family offices. A few weeks ago, the Wealth Management Institute launched the Global-Asia Family Office Circle (“GFO Circle”), designed to support growth of this sector in Singapore. Separately, the family office for Nicky Oppenheimer and his son Jonathan, part of the diamond producer dynasty, set up an outpost in Singapore. Singaporean regulators are reported to be tweaking the Variable Capital Company (VCC) regime to attract single-family offices. (VCCs were introduced at the start of 2020.) Considering how many businesses in Southeast Asia are family-owned, the region is fertile soil for family offices.
In this article, Edmund Leow and Edward Marshall of global law firm Dentons examine Singapore’s family offices market, its prospects and challenges. (This news service’s editor was recently interviewed by Marshall, see here.)
(More details on the authors below.)
The editorial team are pleased to share these views; the usual editorial disclaimers apply and we urge readers to chime in with their views. To comment, email firstname.lastname@example.org and email@example.com
Singapore’s family office sector has drawn considerable attention in the past few years. Prominent multinational family offices are increasingly exploring this island country as a gateway to access Asian investments, and it is rapidly evolving from a regional hub to a robust global destination. Today, Singapore is attracting more family office talent and leveraging public-private partnerships to make it a desirable family office locale.
This article looks at the key reasons behind the growth in the number of family offices calling Singapore home.
A business-friendly tax system
Over the past 20 years, tax havens have come under a lot of criticism and pressure to reform, driven initially by regulators in the US and Europe. In response, Singapore has worked hard to avoid the moniker of “tax haven” while creating a tax system that has attracted businesses to relocate to, and operate in, the country.
Singapore generally promotes substance in its tax, corporate and regulatory systems. The main reason for that is that Singapore is a major business hub. Singapore attracts businesses and investors from all over the world. When foreign entities set up shop in Singapore, government authorities encourage them to make those entities and business activities substantive.
For example, Singapore has tax incentives to attract investment, but these tax incentives require investors to hire local employees and set up factories or leverage physical office space. Moreover, because Singapore has avoided a reputation for being a tax haven, it has also been able to sign many double tax treaties (1) .
Good infrastructure and facilities
Singapore has strived to be attractive as a place for foreign investment. In fact, in the 1960s, when it first became independent, Singapore was one of the first countries to come up with a policy for attracting foreign investment. This was notable because at the time, most Asian countries were not large supporters of foreign direct investment. There were concerns that foreign investors would exploit the local economy and people.
Singapore took a different view. The government created incentives to support these direct investments with the goal of creating jobs, developing its technology sector and making the country a global business hub. This strategy has paid off. Singapore’s total exports and imports in 2020 were S$696.1 billion ($515.6 billion), and its five largest trading partners today are the US, Japan, Mainland China, Australia and Hong Kong (2) .
This attitude has also created a boon for the nation’s family office sector. As wealthy families and investors moved to Singapore, part or all of their family offices followed. Single family offices were the first to arrive, with some acting as satellites of a main office but, more and more, with investors and business owners relocating their entire family office operations there. Today, as the industry increases in sophistication and more families require additional services, the number of multi-family offices is also on the rise.
High levels of safety and strong educational
Singapore is a safe and comfortable location for families to live in. The country has very low levels of crime, making it an attractive place to live; a country where one can enjoy a large city while avoiding the high crime rate commonly associated with densely-populated metropolitan areas.
In addition, Singapore’s educational system is often lauded as one of the best in the world, and the country boasts a literacy rate of 97 per cent (3). The highly-educated workforce in the financial, accounting and legal services sectors has been a key factor for family offices that have chosen to set up shop in Singapore.
Political stability and strong rule of law
Rule of law is front and center in Singapore. The country has a strong dedication to ensuring transparency in how its laws are applied to both investors and businesses. Knowing that decisions are made on the merits of a case instead of through Byzantine and murky pathways makes family offices and businesses feel comfortable living and working in Singapore. The level of corruption in the country is among the lowest in the world.
One of the legacies of Singapore’s 140 years as a British colony is its adoption of English common law as an underlying legal framework. This system remains in place today. Singaporeans have a high level of trust in their legal system.
Location, location, location
In addition to Singapore’s business prowess and standing, the country is a cultural hub as well, balancing Asian culture with a global and cosmopolitan feel. English is Singaporeans’ lingua franca, as well as the language of commerce and law. It is spoken regularly in business, government and within families. Many Singaporeans are effectively bilingual, the result of the country’s successful bilingual language education policy. In addition to English, Singaporeans are educated in the Chinese, Malay and Tamil languages. This has given an advantage to Singapore in attracting investments and talent from the West as well as from the increasingly dominant Asian countries of China and India, and its friend and neighbour Indonesia.
Singapore is also a major logistics (4) and transportation hub. For families and businesses that value this flexibility and access, the country provides a gateway which is hard to beat, including for family offices seeking access to Asian markets. In fact, it is access to direct private equity investing opportunities and publicly traded markets that has driven many families to create satellite family offices in Singapore. It is reported that the number of family offices in Singapore has doubled, to around 400 at year end 2020, compared with 2019 (5). This trend is likely to continue and increase as the COVID-19 pandemic wanes, and travel restrictions are lifted.
Rich in the human capital needed to support family office
Singapore has become an attractive destination for professional and financial services talent. This has created an ecosystem that family offices can readily tap into.
Over the past 20 years, global law, accounting, asset management and banking firms have established large footprints in Singapore. What’s more, the government has continued to offer incentives to attract and retain global talent. Family offices operating in Singapore know that they can comfortably find staff with the right skill sets.
Government incentives that support family
Singapore is a country where the government plays a major role. For example, the Monetary Authority of Singapore (MAS), plays two main roles: central bank and financial regulator. This dual responsibility means that the same organisation that is regulating banks, insurance companies and asset managers is also tasked with enhancing the country’s financial industry.
The government encourages family offices from around the world to set up in Singapore through tax incentives. If facts, circumstances and structure are aligned, it is possible for family offices to apply for tax exemption with respect to investment income generated by the family office.
The government also offers family offices the opportunity to become permanent residents in select cases.
Singapore’s approach to supporting the nation’s family office industry mirrors its efforts, over the past 50+ years, to attract foreign direct investment, and is directly tied to the increase in the number of family offices seen in the country.
Cryptocurrency and blockchain
Crypto and blockchain have been an important part of Singapore’s financial services innovation efforts. Entrepreneurs in this space are increasingly finding the country an attractive place in which to live and operate from.
This trend stems from several areas, one of which is efficiency from the business-friendly tax and regulatory system already in place to attract foreign investment. Another reason is Singapore’s measured approach to regulating the blockchain industry: i.e., enough to ensure that Singapore maintains its strong financial services reputation but also is sufficiently flexible to support the development of this exciting new technology. This balancing act has helped Singapore become an important hub in the crypto and blockchain sector.
Singapore has spent the last 50+ years being open to the world for business. This has resulted in an environment where businesses and family offices alike can thrive.
About the authors
Edmund Leow is a senior partner in Dentons Rodyk’s Corporate practice group and head of the tax practice. He is also co-head of the Trust, Estates & Wealth Preservation/Family Office practice. He has three decades of experience in advising multinational organisations on cross-border tax planning, transfer pricing and tax disputes.
Edward V Marshall is the global head of the Family Office and High Net Worth group at Dentons. He is a family office insider and a prominent family office researcher, advisor, and author.
1, According to the Inland Revenue Authority of Singapore, the nation has signed avoidance of double taxation agreements (DTAs), limited DTAs and exchange of information arrangements (EOI arrangements) with approximately 100 jurisdictions (https://www.iras.gov.sg/taxes/international-tax/list-of-dtas-limited-dtas-and-eoi-arrangements?pg=1&indexcategories=All).
2, Department of Statistics Singapore, 2019 (https://www.singstat.gov.sg/modules/infographics/singapore-international-trade)
3, Statista, 2021, (https://www.statista.com/statistics/994945/singapore-literacy-rate-15-years-and-older/)
4, Singapore was ranked first in the world for logistics competence and timeliness of services and second in Asia on the World Bank's Logistics Performance Index for 2018.
5, The Business Times, October, 20, 2021, “Singapore launches network to support family offices” (https://www.businesstimes.com.sg/banking-finance/singapore-launches-network-to-support-family-offices)