🇸🇬Section 13O and Section 13U: Tax Regimes for Singapore Funds

Concept

Section 13O and Section 13U of the Income Tax Act 1947 are two Singapore tax regimes for funds that exempt specified income from designated investments from the standard 17% corporate tax. Unlike Section 13D, these are not automatic regimes: the fund must obtain an award letter from MAS before the exemption period begins.

13O is the Singapore Resident Fund Scheme for Singapore-based funds, most commonly Pte. Ltd. or VCC. 13U is the Enhanced-Tier Fund Scheme for larger and more flexible structures: onshore, offshore, master-feeder, trust, limited partnership, or umbrella VCC. Both regimes have been extended until 31 December 2029.

Role of MAS and IRAS

MAS administers the award process and verifies compliance with regime conditions. IRAS remains the fiscal administrator: annual reporting, tax position, certificate of residence, and verification of exemption applicability go through the tax framework.

Key sources:

• Income Tax Act 1947, Sections 13O and 13U;
• Income Tax Regulations on exemption of income from funds managed by a Singapore fund manager;
• MAS Circular FDD Cir 10/2024 dated 1 October 2024, applicable from 1 January 2025;
• MAS — Fund Tax Schemes for Family Offices;
• IRAS fund management tax guidance.

Section 13O: Singapore Resident Fund Scheme

13O is designed for funds incorporated in Singapore and qualifying as Singapore tax residents. In practice, this is often a Singapore Pte. Ltd. or standalone VCC.

Eligibility

The fund must:

• be incorporated in Singapore and recognized as a Singapore tax resident;
• be managed by a Singapore fund manager with a CMS Licence or VCFM;
• not have 100% Singapore economic ownership;
• obtain an MAS award letter before the first exemption period.

This is a regime for structures with genuine Singapore tax and management base. If the fund remains offshore and only management is transferred to Singapore, Section 13D is typically examined rather than 13O.

AUM

For a family office under the MAS framework as tightened on 5 July 2023, the minimum is S$20 million in designated investments at the time of application, and that level must be held thereafter. (The April 2022 rules — S$10 million at entry with a commitment to build up to S$20 million within two years — were superseded on 5 July 2023.) AUM is measured by the value of assets qualifying as designated investments; total accounting NAV is not used for the threshold.

Since 5 July 2023 there is no grace period: the full S$20 million must be verifiable at application (the former S$10 million entry with a two-year window was the April 2022 regime). At application you need both a legally ready fund and verifiable investment mass. For general non-SFO funds there is no ramp-up: from 1 January 2025 the minimum (S$5 million for 13O) is checked in designated investments at the end of each financial year.

Local business spending

For 13O managed by a family office (an exempt SFO acting as fund manager), LBS is tiered against the fund's AUM (MAS framework of 5 July 2023):

That is the SFO grid. General non-SFO funds under a licensed manager run on a different one — S$200,000 / S$300,000 / S$500,000, with AUM breakpoints at S$250 million and S$2 billion (FDD Cir 10/2024); only the bottom rung coincides. What separates the two is not the size of the fund but who manages it.

LBS typically includes salaries of Singapore staff, office, audit, lawyers, corporate services, taxes, custody, MAS compliance, and local IT infrastructure for fund management. Not counted: offshore adviser fees, fund administration outside Singapore, and transactional broker fees.

Investment professionals

Minimum 2 investment professionals in Singapore required. Both must be Singapore tax residents, each with a fixed salary of at least S$3,500 per month; one must not be a family member of the UBO.

If only one is hired at application — a one-year grace period for hiring the second may be possible. This does not eliminate the economic presence requirement: MAS looks at genuine involvement in portfolio management, research, trading, and investment decision-making.

Capital deployment

Since April 2022, 13O in the family-office format requires holding at least 10% of AUM or S$10 million (whichever is lower) in eligible local investments. Qualifying assets include SGX-listed equities, bonds of Singapore issuers, units in Singapore PE/VC funds, and — from 2023 — blended finance and climate-related projects in Singapore.

This is a separate test: it cannot be substituted by LBS, AUM, or hiring staff.

Section 13U: Enhanced-Tier Fund Scheme

13U suits larger funds and complex structures. Can apply to company, trust, limited partnership, VCC, master-feeder, onshore or offshore fund. Umbrella VCC with sub-funds is a typical 13U configuration for multi-strategy family offices.

Eligibility

The fund must:

• be managed by a Singapore fund manager with CMS Licence or VCFM;
• obtain an MAS award letter;
• meet conditions on AUM, LBS, investment professionals, and annual reporting;
• maintain the structure described in the award letter.

13U permits single family office and multi-family office. For master-feeder, one award can cover the aggregate structure if conditions are met at the level agreed with MAS. For umbrella VCC, each sub-fund is ring-fenced separately, but the award can cover the umbrella.

AUM

Minimum — S$50 million in designated investments at the time of application. From 1 January 2025, the level must be maintained at the end of each financial year.

The threshold cannot be assessed by accounting AUM without asset classification. Direct Singapore real estate and stakes in related companies with operating business do not work as designated investments for regime purposes.

Local business spending

For 13U in the same SFO track, the grid is identical to 13O:

Composition of expenses is similar to 13O. Offshore service providers and transactional broker fees do not satisfy LBS.

Investment professionals

Minimum 3 investment professionals in Singapore. At least one must not be a family member of the UBO. Minimum fixed salary — S$3,500 per month, but economically more important that functions are not nominal: investment committee minutes, due diligence files, and actual decisions must confirm economic presence.

What is exempt from tax

The exemption covers specified income from designated investments at the fund level. Sources list:

• capital gains from sale of shares, bonds, and fund units;
• dividends;
• interest on bonds and deposits;
• income from derivatives, FX, and commodity contracts;
• distributions from REITs and private fund units.

Not exempt: income from direct ownership of Singapore real estate, income from related companies with operating business, and trading income not qualifying as income from designated investments.

Distributions from 13O / 13U funds to non-resident beneficiaries typically proceed without Singapore withholding tax. Certificate of Residence is available for 13O and the onshore variant of 13U, making DTA protection one of the practical differences from offshore 13D.

Application process

1. Register the fund with ACRA for onshore structure — Pte. Ltd. or VCC.
2. Engage a Singapore fund manager with CMS Licence or VCFM.
3. Prepare business plan, investment mandate, KYC on LP base, CVs and Employment Pass plan for investment professionals.
4. Investment policy, valuation methodology, audit framework, three-year LBS forecast, and for 13O — capital deployment plan.
5. Submit Form 13O or 13U to MAS Financial Markets Development Division.
6. Several rounds of MAS questions.
7. Receive award letter with commitments on AUM, LBS, number of IPs, and capital deployment.

From July 2025, MAS indicates a target timeline of 3 months for reviewing a complete application. Practically, from first structuring call to live award takes 6–9 months for 13O and 6–12 months for 13U: entity setup, hiring, and banking take separate time.

Annual reporting and maintaining substance

After the award, the regime must be maintained annually. Minimum dossier:

• audited financial statements;
• IRAS filing and tax position on specified income;
• classification of AUM in designated investments at end of financial year;
• LBS schedule with supporting invoices, payroll, and provider contracts;
• evidence on investment professionals: employment contracts, residence, salary, role description, investment committee minutes;
• capital deployment tracking for 13O;
• confirmation that structure has not exceeded award letter parameters.

Economic presence and reporting should not be conflated. AUM answers "are there enough qualifying assets," LBS — "did the fund spend enough in Singapore," IP — "is there a real investment team," IRAS filing — "what income is exempt and why."

VCC as vehicle

VCC is a natural vehicle for 13O / 13U. Standalone VCC can go under 13O; umbrella VCC with multiple sub-funds is more commonly used under 13U.

VCC advantages in this context: statutory ring-fencing of assets and liabilities between sub-funds, flexible capital operations, share buybacks, and distributions from capital. For multi-strategy family offices, this allows holding PE, hedge, real estate, and liquid portfolios in separate compartments without creating multiple independent funds.

Who it suits

Section 13O — for whom

• Single Family Office with AUM S$20–50 million.
• Family ready for Singapore fund instrument and genuine economic presence.
• Need for DTA protection and Certificate of Residence.
• Willingness for capital deployment in Singapore.
• Structure linked to GIP Option C, where SFO typically needs tax-efficient setup.

Section 13U — for whom

• Multi-family office or fund with AUM S$50 million+.
• Master-feeder, umbrella VCC, or multi-strategy architecture.
• Complex portfolio with multiple sub-funds and ring-fencing.
• Offshore or onshore fund under Singapore fund manager.
• Economics support LBS S$500,000+ and hiring 3 investment professionals.

When 13O / 13U do not suit

• No genuine economic presence in Singapore: office, IP residents, licensed fund manager, investment decision records.
• AUM below S$20 million (for 13O) or S$50 million (for 13U).
• For 13O — structure with 100% Singapore economic ownership without offshore element.
• Economics do not support LBS, payroll, audit, compliance, and management overhead.
• Portfolio predominantly direct Singapore real estate or non-designated investments.

History and evolution of the regime

The regimes grew out of the former Section 13R and Section 13X. In the Income Tax Act 1947 (2020 Revised Edition, in force from 31 December 2021) the numbering was updated: 13R became 13O, and 13X became 13U. The economic logic stayed the same — exemption of specified income from designated investments in exchange for a Singapore management centre.

Singapore became a family-office hub at the turn of the 2010s–2020s, and in April 2022 MAS materially raised the bar for the SFO variants of 13O and 13U: AUM thresholds, a mandatory share of local investments, tiered business spending, and investment professionals of whom at least one must be a non-family member. A further tightening followed on 5 July 2023: the 13O entry minimum became S$20 million in designated investments at the time of application, and the April 2022 grace period (S$10 million entry plus a two-year build-up) was abolished. From that point economic substance is tested substantively: by real people, spending, and investment decisions in Singapore.

The next turn was FDD Cir 10/2024 of 1 October 2024. For general (non-SFO) funds, from 1 January 2025 AUM is counted only by designated investments: a minimum of S$5 million for 13O and S$50 million for 13U at the end of each financial year. Local business spending became tiered on its own grid — S$200,000 where AUM in designated investments is under S$250 million, S$300,000 from S$250 million to S$2 billion, and S$500,000 from S$2 billion — so both the amounts and the breakpoints differ from the SFO track, a separate 13OA regime appeared for Singapore limited partnerships, and closed-end funds gained the option to meet conditions on a cumulative basis. The requirement that a 13O fund be a newly incorporated company was also removed. The 13D, 13O and 13U schemes are extended to 31 December 2029.

Separately from the tax framework, the licensing perimeter changed in 2026. From 15 June 2026 MAS introduced a class exemption for single family offices: the regime became structure-agnostic, and instead of a licence an SFO files a Notice of Commencement of Business — within 14 days of starting activity for new structures, and by 15 June 2027 for those already operating. This does not affect the 13O and 13U tax regimes: the AUM, LBS and investment-professional conditions are unchanged, and the award is still granted by MAS.

At the regional level Singapore competes with Hong Kong. Hong Kong's FIHV grants 0% profits tax with a minimum of HK$240 million of specified assets managed by an SFO, two investment professionals (who may be family members), and annual operating expenditure from HK$2 million. Singapore's framework is stricter on investment professionals: at least one must be outside the family.