FAMILY OFFICES
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Note: Local investments refer to (i) equities, REITS or Business Trusts listed on Singapore-approved exchanges . (ii) qualifying debt securities, (iii) funds distributed by Singapore-licensed/registered fund managers or financial institutions, (iv) private equity investments into non-listed Singapore-based incorporated companies (eg. Start-ups) with operating business(es) in Singapore.
The recent requirements make SFO’s to –
- Uplifting the standards of SFO in anticipation of upcoming demands and challenges.
- Deepening and broadening of skillsets within SFOs.
- Sufficient resources for sustainability and robust operations of SFOs.
Implications of recent regulatory developments – MAS (Application Criteria and Process for Family Offices (updated 01.12. 2022)
Can a fund invest in the UBO’s operating business?
- Fund vehicles are not considered to be holding controlling stakes in related operating entities:
- fund vehicle does not hold >25% of total outstanding shares of the operating business permanently.
- UBO/family’s shares of the operating businesses do not take up >50% of the total AUM across all fund vehicles owned by the UBO
- Fund vehicles, on average, meet AUM requirements after excluding shares of the family’s operating businesses, per fund vehicle.
- The fund vehicle is not required to consolidate the results of the operating businesses in its accounts; and
- The fund vehicle is not liable to any top-up tax imposed by any jurisdiction as a response to tax exemption enjoyed by the fund vehicle
Exchange of information is extending to CRYPTO – ASSETS
The OECD has recently released a public consultation on Crypto-Asset Reporting Framework and amendments to CRS
Amongst the proposals, the OECD is developing a new global tax transparency framework which provides for the automatic exchange of tax information on transactions in cyrpto-assets in a standardized manner
What does it entail?
- The definition of cyrpto-asset holdings is wide, covering not only crypto-currencies but also NFTs
- Once implemented, crypto-assets holdings would be subject to similar reporting obligations like CRS
- Crypto-service providers are intermediaries would have to be mindful of additional reporting obligations
- Crypto-service providers would also be require additional information from users.
- Existing FIs that deal with crypto-assets may also have additional requirements to implement new reporting frameworks for crypto-assets reporting?
FAMILY OFFICE -DUE DILIGENCE
- The authorities have access to greater amounts of data on financial assets and business assets with more effective technology and tools, leading to greater scrutiny by home country tax authority.
- With data collection mechanisms in place, tax authorities are better equipped
- Initiatives such as BEP 2.0 leverages off the data pools amassed from CRS and CbC reporting
- Understand their “tax residency” position
- Familiarize with reporting obligations (e.g., whether the reporting for FATCA and CRS is done via external financial institutions or through the family’s owns structures)
- Have handle risks of complex structures
- Proper structing of offshore investments or operations
- Need to periodically review offshore structures
- Where restructuring is required , seek legal and tax advice
- Supporting documentation must be maintained for all offshore structures in anticipation of queries from authorities
- Families with business assets and with shares in global MNEs should align CRS with Cbc reporting
Singapore-based SFOs : Entering a new era – MAS circular dated 19-09-2022
“Family refer to individuals who are lineal descendants from a single ancestor, as well as the spouses, ex-spouses, adopted children and stepchildren of these individuals
- To be an exempt FMC that manages assets for or on behalf of the family(ies); and
- Wholly owned or controlled by members of the same family(ies)
SFO also needs to issue annual statement to its investors (for 13D/O funds)
FAQs and Clarifications
Sub-delegation arrangements
Singapore-based FMC must:-
