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PRE-BUDGET 2021 NEWSLETTER
Strengthening Singapore’s wealth management
ecosystem - a low hanging fruit for the
INSERT IMAGE
Government in recovering COVID-19 spending?
February 2021
As the Singapore Budget 2021 will Standard (CRS), means that financial YOUR BDO CONTACTS
be delivered in Parliament on 16 information is readily being exchanged
February 2021, we take this opportunity internationally with the aim of curbing KYLIE LUO
to consider what measures could tax evasion. In addition to this, we Executive Director
be introduced by the Singapore have seen the introduction of the kylieluo@bdo.com.sg
Government and what we would like Economic Substance regulations in
+65 6828 9123 | +65 9711 3760
to see from a private client and wealth popular offshore jurisdictions such
management industry perspective. as the British Virgin Islands and the
Cayman Islands, which has meant that WU SOO MEE
Singapore saw an unprecedented wealthy families now need to consider Executive Director
four Budgets in 2020 with the Unity, where investment, wealth planning and soomee@bdo.com.sg
Resilience, Solidarity and Fortitude business activities will be physically +65 6828 9125 | +65 8333 0807
Budgets targeted at saving jobs, carried out, decide where they will
helping businesses and supporting establish substance and align this to ABNER KOH
families through the challenging their wealth planning structure. Put Executive Director
COVID-19 situation. Although we simply, it is no longer feasible to not abnerkoh@bdo.com.sg
expect the Government to continue have a taxable presence and pay no +65 6829 9645 | +65 8860 4233
to support key sectors, businesses and tax. Hence Singapore, with a favourable
individuals who are the most impacted personal tax regime, stands out as a
REBECCA HARTLEY
by COVID-19, we also envisage that jurisdiction to locate wealth and build
the Government will need to recover Senior Tax Manager
substance.
some of the close to SGD 100 billion rebeccahartley@bdo.com.sg
that it has dedicated to support Given the way that the rest of the world +65 6829 9656
Singaporeans during this crisis. We is moving in terms of tax transparency
therefore provide our insight into and and economic substance, we expect
opinions on how the Government might the approach of the Inland Revenue
raise additional funds and revenue Authority of Singapore (IRAS) to BDO TAX ADVISORY PTE LTD
below, and how this might impact our be similarly fortified by allocating 600 North Bridge Road
clients and Singapore’s existing wealth additional resources towards tax #23-01 Parkview Square
management ecosystem at large. controversy and audits in the coming Singapore 188778
years. Putting aside the introduction of Tel: +65 6828 9118
additional taxes, additional scrutiny on
Tax Controversy and taxpayers is one direct way to boost tax
Fax: +65 6828 9111
Disputes revenue and prevent tax leakage from
the authorities’ standpoint. Singapore www.bdo.com.sg
In recent years, we have seen increased adopts a risk-based approach to identify
scrutiny on the international tax compliance risk and deter taxpayer
transparency of financial assets and non-compliance and we have seen that
economic substance significantly in recent years, the IRAS has begun
changing the global tax landscape. to take an increasingly active stance
For example, the introduction of the by conducting more tax audits but at
Foreign Account Tax Compliance Act the same time, also working closely
(FATCA) and the Common Reporting with taxpayers to resolve tax matters.
PRE-BUDGET 2021 NEWLETTER Strengthening Singapore’s wealth management ecosystem – a low hanging fruit for the Government in recovering COVID-19 spending?
However, we anticipate that more will be will introduce any new taxes or increase Argentina’s wealth tax is expected to such as Family Offices in recent years.
done to identify and challenge those who tax rates to raise additional funds. For collect up to USD 3.7 billion2, which is We consider that Singapore can capitalise
fail to comply with their tax obligations; example, we know that Goods and eye-catching for other Governments. on this to further support and develop
or those who orchestrate their affairs Services Tax (GST) is due to raise by 2% in In the US, we understand that there is the already robust wealth management
artificially to obtain tax advantages. the next few years and certainly we expect some expectation that President Biden ecosystem as we expect the trend for
For example, we expect the IRAS to that this will happen sooner rather than will consider tax rises3 and some states Singapore Family Offices to continue. In
investigate into taxpayers to confirm later given the current economic situation. are pushing for wealth taxes at state particular, BDO has seen a recent increase
that they are legitimate tax residents of However, the GST hike is only expected level. It is now not unimaginable that one in wealthy families from Indonesia (the
Singapore, as the Singapore tax residency to raise additional Government revenue day, wealth taxes could be introduced Omnibus Law may play a part in this) and
status increasingly becomes a much of about 0.7%1 of GDP per year so the worldwide. That said, given that Singapore mainland China setting up Family Offices
sought after prized status. Qualifying as Government may look at other options in is wanting to continue to build Singapore in Singapore to manage their family
a Singapore tax resident would not be a addition to this measure. as an international financial hub and wealth; and at the same time kickstart
simple ‘check the box’ exercise, regardless an attractive place for families from an their plans to permanently reside in
whether its companies or individuals, In view of the global economic downturn, immigration and wealth management Singapore.
especially for those having presence in we do not foresee an increase in Corporate perspective, we do not expect the
multiple jurisdictions. Taxpayers should Income Taxes or Personal Income Taxes. Singapore Government to introduce such Already doing well and let’s do even
therefore have the necessary controls and In fact, we are seeing other jurisdictions a measure at this stage. The Government better
documentation in place to maintain and lowering tax rates to compete with has, in recent years, adjusted its personal
substantiate commercial substance in Singapore’s favourable tax system. For tax rates to be more progressive and we As the icing on the cake, Singapore
Singapore to ensure that they meet the example, we recently saw Indonesia expect that it may continue with these offers a choice of three attractive tax
relevant requirements. drop its corporate tax rate to ultimately kind of adjustments. incentive schemes for Singapore-based
become 20% by 2022 under the recently and offshore fund vehicles that can be
In recent years, we have seen much passed Omnibus Law. Having said that, This then brings us to the core discussion managed by Family Offices in Singapore.
focus by IRAS on medical practitioners there is a tempting pot of honey created of this article, strengthening Singapore These schemes (13X, 13R and 13CA) are
structuring their revenue across multiple by a strong performance in the Singapore wealth management ecosystem. administered by the Monetary Authority
companies to achieve an overall lower property market during the pandemic, of Singapore (MAS) and its Family Office
tax liability but going forward, we expect demonstrating the resilience of such an Development Team that was established
to see such scrutiny stepping up to asset class, reinforced by purchases made Enhance Singapore’s Wealth in 20194, in a bid to enhance the country’s
cover a wider range of other professional by foreign high-net-worth individuals Management Ecosystem competitiveness as a Family Office
practices. The IRAS could also take a (HNWI). Recent figures released by the hub. We have been impressed with the
tougher position on consequences such as Government also show that the prices Notwithstanding the two points above, success of these schemes in recent years
penalties and naming and shaming. Clients of public housing resale flats surged to we believe that one of the key engines and with over 200 single Family Offices
may therefore wish to take pre-emptive multi-year highs last year in defiance of of recovery for Singapore is to boost already established in Singapore, we
measures to manage potential tax risks, the recession, while private property prices and enhance its already thriving Family certainly expect the trend to continue,
for example by obtaining an advanced also climbed. This pot of honey is simply Office and private wealth management further contributing to Singapore’s wealth
ruling from the IRAS for confirmation too shiny to ignore not just from the ecosystem. We know that Singapore is management ecosystem. In view of the
on certain tax treatments and seeking perspective of tax but also the potential already a successful international wealth success that the MAS has seen from its
professional advice from tax advisers effects on the society in terms of housing management hub that offers certainty Family Office Development Team, which
in respect of complex tax structures. affordability. It is therefore not surprising and stability for foreign investors and was formed as a strategic partnership with
Furthermore, where taxpayers are aware to hear more discussions about the has the capabilities to support the the Economic Development Board (EDB)4,
that their current tax filing may not be Singapore Government bringing in further industry in terms of professionals such we feel that this could be developed and
correct, they should also seek tax advice cooling measures soon such as increasing as in tax, legal and financial services. brought to the next level by enhancing
and correct their tax filing position under Stamp Duty taxes. We therefore consider how this could the cross-agency efforts with the Ministry
the Voluntary Disclosure Program, which further be enhanced to boost investment of Manpower (MOM). Although we have
offers significantly reduced penalties. One idea that has also been floating in Singapore, which would ultimately seen a remarkable acceleration of growth
Coming back to the topic of CRS around, is the possibility that Singapore generate more employment and economic in the Family Office industry, even in the
mentioned earlier, we are already seeing could introduce a wealth tax. It is activity; and consequently increased past year during the coronavirus pandemic,
a number of CRS audits launched by the clear that there is a gap between the revenue for the Singapore Government. we see areas that could be fine-tuned to
IRAS in respect of recent CRS compliance haves and the have-nots in Singapore, improve the ecosystem even further, based
so we also expect this trend to continue especially with the increasing number of A trend set to continue on our “on the ground” involvement in
going forward. In fact, we are assisting HNWIs in the region. This is particularly assisting clients with the implementation
A combination of the implementation
some clients with ‘health checks’ in topical as we have seen other countries of Family Office structures.
of the new international regulations
preparation for the impending formal CRS introduce wealth taxes over the years, mentioned above as well as the rising
reviews. including Argentina which passed a new We were pleased to see the MAS introduce
growth of Asian wealth has influenced
wealth tax in December 2020 to help families’ decisions globally. In Asia, a the 3-pillar strategy to enhance the
the Government pay for health supplies environment, develop the capabilities in
Tax Rises and economic relief measures amid
region with some of the world’s top
the industry and attract global Family
billionaires, we have seen more families
In addition to enforcing existing tax the ongoing COVID-19 pandemic. We considering the need to consolidate and Offices to be more connected as well as
legislation, there is also the hot topic of also know that other countries in Latin professionalise the management of their the “FO circle” sharing platform and the
discussion as to whether the Government America have pushed for similar measures. family’s wealth through formal structures Family Office advisor skills map to give
advisors more guidance on their roles.
PRE-BUDGET 2021 NEWLETTER Strengthening Singapore’s wealth management ecosystem – a low hanging fruit for the Government in recovering COVID-19 spending?
However, we do feel that there remains for single Family Offices. The MAS was Having said the above, we are pleased further strengthen its position, there are
some disconnect between the MAS and quoted recently saying that it is looking to see that the EDB and MAS are already already a number of incentives available
another key Government agency i.e. into “widening the scope of permissible working closely to ‘matchmake’ investors for businesses to set up in Singapore via
the MOM, which often leads to delays fund managers to allow SFOs to manage and businesses in areas such as FinTech the EDB and we hope for the Government
in the process of setting up a Family VCCs”. We do expect that it will take some and host events such as the Singapore to further support these businesses in
Office in Singapore. Although the MAS time to work out the logistics of how this FinTech Festival. Singapore has worked the future. In particular, we are seeing an
has pro-actively taken steps to facilitate will work from a regulatory perspective to hard to implement forward-looking increase in queries from clients based in
the application of Employment Passes ensure that Singapore maintains its strong policies that generally help businesses North Asia demonstrating that Singapore
(EP) with the MOM, there is seemingly regulatory framework. However, we are grow and encourage innovation and is indeed being regarded as the gateway
still some difficulties in terms of the pleased to hear that this positive move trade. We urge this kind of support to to Asia.
flow of information from the MAS to the is being considered by the authorities continue, especially now that the socially
relevant MOM personnel handling the EP and we look forward to hearing how this and environmentally conscious next In summary, we expect an enhanced
applications on the ground. We have been develops. This means a lot for families who generation are now ‘taking the helm’ wealth management ecosystem to have
impressed with the MAS’s nimble reaction treasure control in relation to investment of many Family Offices and are keen to ‘spill-over’ contributions back to the larger
to the pandemic and how quickly the management activities as well as the diversify investments. The Government economy; and it is critical to carefully
‘interim arrangement’ was introduced to flexibility offered by the VCC. may also consider introducing preferential drive and direct these ‘spill-overs’ to
allow 13X tax incentive applications to be tax rates or investment schemes for generate further economic activity, meet
submitted before the EPs are issued, due to The wealth management ecosystem particular investments such as ESG the strategic objectives of Singapore; and
the ongoing difficulties with international must contribute back investments, which seek to improve thereby bringing tangible benefits to the
travel. However, our view is that there the long-term impact on society, wider population.
could still be some more flexibility in In terms of how private wealth is boosting sustainability and the environment. In
terms of the In-Principle Approvals (IPA) investments in Singapore, we note from addition, we also hope to see Government
that only have six-months validity with trends we see with our Family Office authorities such as the MAS further Concluding comments
limited extensions. We also note that clients that there are particular areas of facilitate the training and development There is no question that the COVID-19
13R approvals are currently taking much interest such as FinTech, ESG, private of the next generation so that they are spending has to be recovered. Amongst
longer to receive approval (possibly due equity / venture capital, education, fully prepared to take over the wealth a range of options and tools in the
to the volume of applications), whereas medical and philanthropy investments. management responsibilities for their Government’s toolbox, let’s start off
13X applications appear to be relatively Recently it was reported that billionaire families. The training and development by targeting the low hanging fruit of
quicker. With further streamlining of the Ray Dalio, founder of Bridgewater by itself then sustains the ecosystem strengthening and directing the already
tax incentives application process in a Associates, would open a Family Office by providing a constant supply of successful wealth management ecosystem
Family Office context, we expect there to in Singapore to run his investment and professionals with the relevant expertise in Singapore.
be no limit to the success of Singapore’s philanthropy activities in the region5. and experience.
wealth management ecosystem as spin- We therefore want to see more from the
off benefits to the wider economy can be Government in terms of supporting and Furthermore, Singapore’s appeal Sources
generated. developing these key areas. We understand as a strategic location for regional
that Singapore attracted around SGD headquarters is obvious and BDO has seen 1
https://www.straitstimes.com/singapore/singapore-budget-2018-gst-
to-be-raised-from-7-to-9-sometime-between-2021-and-2025
In respect of the fund incentive schemes, 17.2 billion in fixed assets investments in an increased demand from clients seeking
2
https://www.reuters.com/article/argentina-economy-tax-
we also wonder if the Government will 2020, which was significantly higher than to deepen their family business presence idINKBN28F0FM
seek to extend the scope of specified the EDB’s target and a 12 year high for in Asia (after establishing their Family 3
https://www.constructiondive.com/news/biden-administration-
income from designated investments Singapore so we would like the authorities Office structure in Singapore for purposes corporate-tax-rate/593771/ & https://www.bloomberg.com/news/
articles/2021-01-06/tax-code-changes-wealth-taxes-considered-from-
that are exempted from tax under the to build on the success in this area and of their family wealth) and leverage off california-to-germany
incentives to include income from new extend the focus to these popular areas, Singapore as a place to establish their 4
https://www.mas.gov.sg/who-we-are/annual-reports/annual-
alternative assets in the future such which we believe are also in line with international headquarters for their family report-2019-2020/innovative-and-inclusive-financial-centre
as cryptocurrencies, which some may the overall direction of the Government. business (from which their family wealth 5
https://www.businesstimes.com.sg/banking-finance/billionaire-ray-
view as a controversial move, but it For example, by supporting Singapore is generated). This is partly due to the dalio-set-to-open-family-office-in-singapore
might encourage more foreign investors start-ups as we consider that more could ease of doing business in Singapore, with 6
https://www.edb.gov.sg/en/our-industries/industries-and-key-
activities/headquarters.html#:~:text=Tap%20experienced%20
(especially the successive generations be done to stimulate the start-up scene its openness to trade and innovation, talent%20across%20functions,studies%20by%20AON%20and%20
of wealthy families) as cryptocurrencies in Singapore. This will work well with the political stability and connectivity to the KPMG
such as stablecoins are more acceptable increase in demand we are seeing for region but also due to its highly skilled
internationally. Given our earlier discussion Government-backed schemes such as workforce. We therefore expect the
on the Singapore property market, it is the Global Investor Programme (GIP), Government to further support its pool
also important to remember that income where individuals are seeking to invest in of talent by offering more incentives to
from Singapore properties is not covered Singapore and reside here permanently train and develop skills such as by topping
by the incentives and we do not expect and thereby obtain Singapore Permanent up training credits under the SkillsFuture
this to change in the future. Resident status. Facilitation can be done to campaign. We understand that Singapore
encourage the channelling of investments is home to the largest number of
A further development that we expect committed by the GIP applicant to headquarter jobs from global Fortune
to see in the not-too-distant future for the above-mentioned targeted areas, 500 companies compared with other key
the wealth management industry, is the especially when we hear on the ground Asia hubs6, thereby contributing back to
enhancement of Singapore’s Variable feedback that certain requirements for the Singapore community by creating
Capital Company (VCC) that launched economic commitments (e.g. in a Family more employment opportunities. In terms
in January 2020 to become available Office context) may not be practical. of what the Government could do toThis publication has been carefully prepared, but it has been written in general terms
and should be seen as containing broad statements only. This publication should not
be used or relied upon to cover specific situations and you should not act, or refrain
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specific professional advice. Please contact BDO Tax Advisory Pte Ltd to discuss these
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