Navigating Singapore’s Updated Fund Tax Incentive Schemes

• Extended Validity: All major schemes (13O, 13U, 13D) are now secure until 31 December 2029.
• New Scheme: Introduction of Section 13OA for Singapore-limited partnership (LP) funds.
• Increased Substance Requirements: Tiered local business spending and stricter minimum fund sizes.
• Clarified Fund Requirements: Introduction of a Capital Deployment Requirement and clearer rules on Investment Professionals.
• VC/PE Flexibility: A new “closed-end fund” option provides clarity for private equity and venture capital lifecycles.

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A Closer Look at the Schemes

Section 13O: Onshore Fund Tax Incentive Scheme

The Section 13O scheme provides tax exemption on specified income for Singapore-incorporated companies. The requirements have been significantly tightened to ensure substantive fund management activity in Singapore.

Latest Requirements (From 1 Jan 2025):

• Minimum Fund Size: S$5 million in Designated Investments (DIs), a new minimum that did not exist previously. This AUM in DIs must be maintained at the end of each financial year
• Investment Professionals: The Singapore fund manager must employ at least two investment professionals. For funds managed by family offices, at least one of these professionals must be a non-family member. 
• Local Business Spending (LBS): A tiered spending requirement now applies:
  • AUM < S$250m: S$200,000
  • AUM S$250m – <S$2b: S$300,000
  • AUM ≥ S$2b: S$500,000
• Capital Deployment: Must invest at least the lower of S$10 million or 10% of its AUM into certain qualifying investments, which include equities of MAS-approved exchanges and climate-related investments.
• Other Key Changes:
  • The condition that the fund must be a newly set-up company has been removed, allowing funds to acquire investments prior to applying for the incentive.
  • The fund must not be 100% owned by Singapore investors 

New: Section 13OA for Limited Partnership Funds

Recognising the popularity of the LP structure, especially for venture capital and private equity funds, MAS introduced Section 13OA effective 1 October 2024. This scheme provides a dedicated tax incentive pathway for Singapore-based LPs, with conditions closely aligned to the updated Section 13O requirements. This is a significant development for fund structuring flexibility. The general partner of the Section 13OA fund is responsible for meeting the incentive conditions.

Section 13U: The Enhanced Tier Fund Scheme

Section 13U offers a more flexible framework for both onshore and offshore funds, with higher thresholds suited for larger, more established fund vehicles.

Latest Requirements (From 1 Jan 2025):

• Minimum Fund Size: S$50 million in Designated Investments (DIs), which must be maintained at the end of each financial year.
• Investment Professionals: Must employ at least three investment professionals, with at least one being a non-family member.
• Local Business Spending (LBS): Subject to the same tiered spending requirement as Section 13O (from S$200,000 to S$500,000 based on AUM).
• Capital Deployment: Same requirement as 13O (the lower of S$10m or 10% of AUM).

An edge that Section 13U holds is the absence of adverse tax consequences for non-“qualifying” investors, making it suitable for funds with a broader, more diverse investor base.

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Summary of Key Features and Requirements

The following table provides a clear comparison of the three main tax incentive schemes for funds in Singapore, reflecting the latest changes effective from 1 January 2025.

Areas of Comparison	Section 13O (Onshore Company)	Section 13U (Enhanced Tier)	Section 13OA (New LP Scheme)
Fund’s Legal Form & Residence	Singapore-incorporated company (Tax resident in Singapore)	Any legal form (e.g., company, trust), can be onshore or offshore.	Singapore-limited partnership (Tax resident in Singapore)
Minimum Fund Size	Minimum S$5 million in Designated Investments (DIs)	Minimum S$50 million in Designated Investments (DIs)	Minimum S$5 million in Designated Investments (DIs)
Investment Professionals	Minimum 2, with at least 1 non-family member	Minimum 3, with at least 1 non-family member	Minimum 2, with at least 1 non-family member
Local Business Spending	Tiered Requirement: • AUM < S$250m: S$200,000 • AUM S$250m-<S$2b: S$300,000 • AUM ≥ S$2b: S$500,000	Tiered Requirement: • AUM < S$250m: S$200,000 • AUM S$250m-<S$2b: S$300,000 • AUM ≥ S$2b: S$500,000	Tiered Requirement: • AUM < S$250m: S$200,000 • AUM S$250m-<S$2b: S$300,000 • AUM ≥ S$2b: S$500,000
Capital Deployment Requirement	Yes, the lower of S$10 million or 10% of AUM	Yes, the lower of S$10 million or 10% of AUM	Yes, the lower of S$10 million or 10% of AUM
Fund Administrator	Mandatory to appoint a Singapore-based fund administrator.	Mandatory if the fund is incorporated/tax resident in Singapore.	Mandatory to appoint a Singapore-based fund administrator.
Investor Composition	Cannot be 100% owned by Singapore residents.	No restrictions on investor residency.	Cannot be 100% owned by Singapore residents.

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Additional Strategic Considerations & Application Process

New Streamlined Application Process

From 2 January 2025, all new applications for the tax incentives must be made through the new MAS Tax Scheme portal . This single-step application process simplifies the procedure and is expected to shorten processing times, a significant improvement from the previous multi-stage email and portal submissions .

New “Closed-End Fund” Option

In a welcome move for private equity and venture capital funds, the MAS has introduced an option for “closed-end fund” treatment . Funds that irrevocably opt for this treatment benefit from:

• Waiver of the AUM requirement from the sixth incentive year onward.
• Cumulative fulfilment of the LBS requirement up to the tenth incentive year.
• The tax incentive will be revoked after the fund’s divestment phase or its 20th year, providing much-needed tax certainty throughout the fund’s lifecycle .

Reduced Restrictions and Enhanced Flexibility

• Investment Strategy: The condition that a fund must only serve the MAS-approved investment strategy has been removed. While the strategy should still be within the fund’s mandate, any changes only need to be reported to MAS for information, not pre-approved .
• 30/50 Rule Waiver: The 30/50 rule, which limited investments from non-qualifying investors, has been waived for trusts and unit trusts that are themselves incentivised under the Section 13D scheme, effective from Year of Assessment 2025.

Grace Periods for Compliance

Recognising the need for adjustment, the MAS has provided grace periods. Existing funds with incentives commencing before 1 January 2025 have until the financial year ending in 2027 to fully meet the updated economic criteria, such as the new AUM and tiered LBS requirements.

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Concluding Thoughts

The recent updates to Singapore’s fund tax incentive regime reflect a balanced and strategic approach. By raising the bar for economic substance through minimum AUMs and tiered spending, Singapore reinforces its commitment to international standards and its status as a high-quality financial hub. Simultaneously, the introduction of the Section 13OA scheme for LPs, the closed-end fund option, and the streamlined application process demonstrate a pragmatic understanding of fund operational needs, offering greater flexibility and certainty.

For fund managers, this means that while compliance requires more planning, the rewards are access to a stable, well-regulated, and attractive tax environment. The changes present both challenges and opportunities, making expert guidance more valuable than ever.

Navigating the intricate pathways of Singapore’s tax regime demands expertise and foresight. At Vodich, we are committed to supporting fund managers in harnessing the full potential of these tax incentives, providing a clear blueprint on the tax implications and options for your fund. Our team pledges to align with your vision, ensuring a seamless journey that complies with regulatory stipulations.

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