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Singapore imposes new rules on family offices as Hong Kong recovers from Covid-19

Andy Mukherjee for Bloomberg
Andy Mukherjee for Bloomberg5/6/2022 9:54 AM GMT+08  • 6 min read
Singapore imposes new rules on family offices as Hong Kong recovers from Covid-19
New rules that kicked in April 18 will mean that family offices face a stricter regime to enjoy tax-exempt incomes. Photo: Bloomberg
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Singapore had the perfect opportunity to lure away billions of dollars of wealth from Hong Kong, whose isolationist approach to Covid-19 and a Beijing-imposed national security law are sapping confidence in the financial centre. Yet the Asian city-state is moving in the opposite direction. Its freshly tweaked tax policies are sending a signal to the rich: “Your money is welcome if you treat us less as a hotel, and more like home.”

New rules that kicked in April 18 will mean that family offices, through which the ultra-wealthy manage their fortunes, face a stricter regime to enjoy tax-exempt incomes. Each fund needs be at least $50 million, and 10% of it or $10 million — whichever is lower — should be invested in Singapore-listed securities or local startups. There had been no such local investment stipulation earlier. Depending on their size, family offices must also spend $500,000 to $1 million in the domestic economy each year, up from $200,000 previously. Of the minimum three investment professionals they’re required to hire, at least one must now be a nonfamily member.

To ask the moneyed to splurge more on hiring local talent, renting office property and buying Singapore assets is a bold move. Yes, the uber-rich had a great 2021: Globally, the number of people with US$30 million ($41.4 million) in net assets or more swelled by 51,000 or 9.3%, according to Knight Frank. But if inflation is making 2022 a hard year for the less affluent, the wealthy have their own set of problems. The war in Ukraine, the slowdown in China, stretched global supply chains, slumping tech stocks, and a hawkish US Federal Reserve are all weighing on investor sentiment. When it comes to expanding, notoriously opaque family investment vehicles that are believed to manage in excess of US$4 trillion worldwide — more than hedge funds — won’t be immune to the heightened uncertainly.

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