Singapore offers tax incentive in wealth play

Wealth Bulletin

Singapore has boosted its effort to attract wealth managers, hedge funds and private equity funds to the country with a new tax incentive, as a US justice department suit against UBS raises questions over Swiss private bank’s ability to protect their clients’ details.

Under the new regulations, funds with assets under management of S$50m (€25.8m) will benefit from a new enhanced tax tier.

Sharon Hartlin, a partner at law firm White & Case in Hong Kong, said: “This is going to make Singapore even more attractive to funds and fund managers. People will look hard at Singapore as an option when the markets come back as there is now a menu of tax and regulatory reasons to invest in Singapore.

Under current conditions, Singapore residents are inadvertently discouraged from having their funds managed from Singapore due to limits on their investment in the fund, according to White & Case. Under the new rules, these retrictions will be lifted, making limited partnerships in particular more appealing.

The enhanced tier will be open to vehicles in the form of companies, trusts and limited partnerships, and there will be no restrictions on the residency status of the fund vehicles or the investors. The incentive will open to applicants from April 1 2009 through to March 31 2014, though funds which are part of the scheme before the cut off date will be able to continue to enjoy the benefits of the scheme post-2014 provided they meet the schemes conditions.

Linda Ng, a counsel at White & Case in Hong Kong, added: “The immediate beneficiaries of this enhanced incentive are Singapore-resident non-individual [including corporate] investors. Singapore has a range of tax incentives intended to attract off shore and on shore funds.

“As well as tax exemptions for investment funds, Singapore has a 10% concessionary tax rate for approved fund managers, with that rate falling to 5% for sharia-compliant activities.”

The move by the Singapore government arrives as the wealth management industry in Switzerland, considered as the primary private banking venue, faces an uncertain future. The US Justice Department today sued UBS to gain access to 52,000 accounts belonging to US clients following a separate tax-evasion probe, raising questions over the ability of Swiss private banks to offer protection to clients.

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