🇸🇬Section 13D: Singapore Tax Regime for Offshore Funds

Concept

Section 13D Income Tax Act 1947 is a Singapore tax exemption regime for foreign funds managed by a Singapore-based fund manager. It exempts specified income from designated investments from Singapore's 17% corporate income tax when conditions relating to the manager, assets, investors, and annual compliance are met.

The key feature of 13D is that it is an automatic scheme. The fund does not receive an award letter from MAS, as with Section 13O / 13U, and does not submit a separate application for the relief. However, the automatic nature does not mean an absence of evidentiary requirements: during an audit, the fund and manager must demonstrate why the income was exempted from the standard rate.

Where Section 13D Applies

13D works when the fund itself is located outside Singapore, but investment management is transferred to Singapore. Typical structures include Cayman LP, BVI Limited, foreign trust, Delaware LP, or comparable offshore structures.

This is a regime for foreign funds. Singapore funds have their own tracks: VCC and Pte. Ltd. fall under Section 13O / 13U, while a Singapore LP falls under Section 13OA, introduced with effect from 1 January 2025. If the fund remains foreign but is managed from Singapore through a CMS-licensed manager, VCFM, or other permissible Singapore-based fund manager, 13D provides a safe harbour from Singapore tax on investment income.

Practical trade-off: 13D allows management and banking/custody to be conducted through Singapore without re-domiciling the fund, but the offshore fund itself typically does not become a Singapore tax resident and does not receive full DTA protection from Singapore.

Regulation

The primary legislation is the Income Tax Act 1947, Section 13D. Working details are set out in the Income Tax (Exemption of Income of Prescribed Persons Arising from Funds Managed by Fund Manager in Singapore) Regulations 2010.

The Regulations define prescribed person, specified income, designated investments, the 30/50 rule, and financial penalty. The Amendment Regulations 2025 (S 723/2025) inserted the Fifth Schedule retroactively for income derived from 19 February 2022 and amended it from 24 November 2025; the minimum AUM and local business spending thresholds remained eligibility conditions of 13O / 13U and were not extended to 13D.

Official guidance is available from IRAS Specific topics and MAS Fund Tax Incentive Scheme.

Eligibility: Four Conditions

1. Prescribed person

An offshore fund vehicle that does not carry on business in Singapore and does not have a permanent establishment in Singapore. Management through an independent Singapore-based fund manager under an investment management agreement should not create a permanent establishment of the fund—this is the logic of the safe harbour.

Conditions: the fund is not a Singapore tax resident; the fund has no office, employees, or dependent agent in Singapore; the fund does not conduct operational business in Singapore; assets have not been artificially transferred from a Singapore business to an offshore fund.

2. Singapore-based fund manager

A Singapore company with the right to manage investor funds: a fund manager with a Capital Markets Services Licence (including an A/I LFMC), a licensed VCFM, or a relevant licensing exemption. MAS repealed the Registered Fund Management Company (RFMC) regime with effect from 1 August 2024; RFMCs that wished to continue had to apply to become A/I LFMCs, so an RFMC is no longer an available form of manager.

From the year of assessment 2028 (usually the financial year ending in 2027), a substance requirement is added: the manager must employ at least one qualifying investment professional — a portfolio manager, research analyst or trader who is a Singapore tax resident and engages substantially in fund management; for 13D there is no salary floor (FDD Cir 05/2026, Annex 9).

3. Specified income from designated investments

The exemption works on an asset + income linkage. The asset must be a designated investment, the income must be specified income. If the fund holds a non-designated investment, the regime is not lost entirely, but income from that asset is not exempted.

Section 13D itself has no minimum AUM requirement — unlike 13O and 13U. For general (non-SFO) funds these are S$5 million in designated investments for 13O and 13OA and S$50 million for 13U as entry conditions: MAS Circular FDD Cir 05/2026 of 31 July 2026 removed the annual test of the threshold retroactively from 1 January 2025, and a 13O or 13OA fund may reach the S$5 million by the end of the third year of assessment of the award; family offices follow the MAS conditions of 5 July 2023 — S$20 million and S$50 million respectively, at the point of application and at the end of each basis period. The tiered local business spending framework — S$200,000 / 300,000 / 500,000 for non-SFO funds and S$200,000 / 500,000 / 1 million for family offices — likewise remains a condition of 13O / 13U and does not extend to 13D.

4. Rule 30/50

Qualifying investors typically do not trigger a penalty: individuals, foreign companies and trusts without business in Singapore, certain institutional investors, and funds under comparable regimes.

A non-qualifying investor is typically a Singapore investor. Threshold: more than 30% including related parties when there are <10 investors; more than 50% when there are ≥10 investors. Section 13D(2) and (4) ITA say "more than the prescribed percentage", so exactly 30% or exactly 50% does not trigger the penalty. From YA 2025 MAS waived the 30/50 rule for investors that are themselves trusts or unit trusts incentivised under 13D: such a trust counts as a qualifying investor both in a 13O or 13OA fund and in another 13D fund. For other non-qualifying investors of a 13D fund the rule continues to apply.

Specified Income and Designated Investments

Specified income typically includes interest, dividends, distributions, gains from the disposal of designated investments, income from derivatives on permitted assets, and other investment income.

Excluded from the exemption are:

• distributions from Singapore-listed REITs;
• certain distributions from Singapore trusts;
• income through partnership / LLP / LLC structures if tax has already been withheld or paid at the relevant level;
• income from business conducted in Singapore outside the safe harbour.

Designated investments are set out in Schedule 5 of the Regulations 2010 for income from 19 February 2022 (earlier periods were covered by Schedules 3 / 4). In practice, the portfolio is checked by the legal inclusion of a specific instrument in the list; the marketing category "liquid assets" settles nothing here.

Financial Penalty

If the 30/50 rule applies, the non-qualifying investor pays a financial penalty:

Penalty = A × B × C

A — the investor's share in the value of the fund on the relevant date.

B — the amount of the fund's income as reflected in its audited accounts for the basis period relating to that year of assessment (the formula is set out in Section 13D(2) ITA).

C — the applicable tax rate, typically the prevailing corporate tax rate of 17%.

The penalty compensates for the tax not paid at the fund level due to the exemption. It does not replace the ordinary taxation of the investor in their own jurisdiction.

The Comptroller may permit the investor to reduce the stake within a period the Comptroller specifies, capped at 3 months from the relevant day (Section 13D(3) and (5) ITA); the penalty then does not arise. Fund documentation typically includes compulsory redemption or forced buy-back, an obligation to provide investors with data to calculate the penalty, and an obligation for the non-qualifying investor to pay it independently.

Annual Compliance

13D requires discipline even without an MAS award letter:

• audit confirms specified income, designated investments, absence of operational presence of the fund in Singapore, and investor mix data;
• the manager documents the substance investment professional from FY 2027;
• a minimum AUM and tiered LBS thresholds are not 13D conditions — they apply to 13O / 13U;
• the investor register is checked for the 30/50 rule and financial penalty;
• the IRAS position is documented as self-assessment, including a nil return or internal notification where this is the chosen conservative position;
• MAS reporting follows the manager's status — CMS / A/I LFMC / VCFM — and the 13D fund itself falls outside it (the RFMC regime was repealed on 1 August 2024).

What Changed from 2025

On 1 October 2024 MAS issued an updated circular on the 13D, 13O and 13U fund incentives; the changes took effect on 1 January 2025, and the schemes themselves were extended until 31 December 2029 — so a structure can now be planned with a clear horizon.

The key change is the AUM methodology: the minimum threshold is measured by designated investments (previously total assets or NAV were counted). For 13U it is S$50 million at the point of application; for 13O and 13OA, general (non-SFO) funds need S$5 million in designated investments, which may be reached by the end of the third year of assessment of the award. The annual re-test of these non-SFO thresholds introduced by FDD Cir 10/2024 was removed by FDD Cir 05/2026 of 31 July 2026 retroactively from 1 January 2025: the threshold is now an entry condition only. Family offices follow their own track: under the MAS conditions of 5 July 2023, 13O requires S$20 million in designated investments already at the point of application.

Team requirements have tightened as well. 13D now requires a Singapore manager with at least one investment professional — previously there was no formal requirement. For general (non-SFO) funds under 13O, two IPs are likewise introduced for the first time, from the financial year ending in 2027; 13U keeps three. Under the MAS conditions of 5 July 2023 an IP's salary must exceed S$3,500 a month; the single IP under 13D carries no salary minimum. Local business spending has been tied to AUM through tiered grids with the same breakpoints of S$250 million and S$2 billion in designated investments — S$200,000 / 300,000 / 500,000 for general (non-SFO) funds and S$200,000 / 500,000 / 1 million for family offices — reinforcing the economic presence requirement. The family-office grid and the capital deployment test (the lower of 10% of AUM or S$10 million in qualifying Singapore-linked investments) apply from the year of assessment whose basis period ends on or after 1 August 2026 to new awards and to existing awards granted under the 18 April 2022 and 5 July 2023 conditions; in the two upper tiers at least S$300,000 and S$500,000 respectively must be local business spending proper, the rest may come from eligible donations and blended-finance grants (MAS Circular FDD Cir 05/2026). Earlier basis periods used the MAS grid with breakpoints of S$50 million and S$100 million.

For 13U structures — master-feeder, master-SPV and master-feeder-SPV — AUM and LBS are computed at the level of the whole structure as a single fund: the previous additional AUM and LBS conditions for each SPV or trading feeder have been removed. 13D has no AUM or LBS conditions to which this rule could apply.

Where the Regime Fits and Where It Does Not

Fits

• An offshore fund already exists and should not be re-domiciled to Singapore.
• Management can be delegated to a Singapore-based fund manager with CMS, VCFM, or permissible exemption.
• The investor base is predominantly non-Singapore; the 30/50 rule does not erode the economics.
• The strategy holds liquid securities, equities, debt, derivatives, foreign REITs, or other assets falling within designated investments.
• DTA protection from Singapore is not critical to the client—a fund under 13D is typically not a Singapore resident.

Does not fit

• Singapore fund: VCC and Pte. Ltd. fall under 13O / 13U, and a Singapore LP falls under 13OA.
• The portfolio consists mainly of direct Singapore real estate or non-designated investments.
• The structure has a large share of Singapore investors in the form of a company or LP—the financial penalty destroys the exemption effect.
• The manager does not have a Singapore licensed presence.
• The main objective is to use Singapore DTAs to reduce withholding tax at source.