Singapore Fund Tax Incentive Scheme Enhancements and Clarifications (Non-SFO): MAS Circular 05/2026
Background
On 31 July 2026, the Monetary Authority of Singapore ("MAS") released FDD Cir. 05-2026 Tax Incentive Schemes for Funds (the "Circular"), introducing enhancements and clarifications to Singapore's fund tax incentive scheme for non-single family office (“non-SFO”) funds[1].
The updates are particularly relevant to private capital funds (e.g. private equity, venture capital, infrastructure, real estate and credit funds) approved under the Section 13D, the Section 13O, the Section 13OA and the Section 13U of the Income Tax Act 1947 (“ITA”) (“S13D Scheme”, “S13O Scheme”, “S13OA Scheme” and “S13U Scheme” or collectively, referred to as “Schemes”), and to fund managers considering Singapore as a preferred location for raising capital and holding investments.
The changes apply both to new awards and, through a transitional mechanism, to existing awards. In this alert, we summarise the key changes to the conditions of the Schemes’ and provide our observations on the practical implications.
IN BRIEF
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In Detail
1. Removal of Annual Minimum AUM in DI Requirement
One of the most significant changes is the removal of the requirement for funds to maintain the minimum AUM in DI threshold at the end of each financial year, with effect from 1 January 2025. This formally confirms the position previously signaled by MAS. The revised position distinguishes between the entry condition (tested as on the date of filing the application) and the annual condition.
A&M Observation The removal of the annual year-end minimum AUM in DI requirement is a welcome simplification following industry feedback. It reduces the ongoing compliance burden and better aligns with the lifecycle of private capital funds, particularly providing greater flexibility during the deployment and divestment phases. S13U Scheme requires minimum S$50 million AUM in DI as at the date of application[2] . Although addition of feeder funds or SPVs do not increase the AUM in DI, the MAS expects S$50 million AUM in DI condition (on a consolidated basis) to be satisfied at the point of such addition which as per current process is required to be approved by the MAS. The removal of feeder funds or SPVs only requires a notification to the MAS and no corresponding testing of AUM in DI as on such date. |
2. Closed-End Fund Treatment: Clarification on Entry Conditions for Funds Approved under S13O/OA Scheme
The MAS has clarified that a fund approved under S13O/OA Scheme applying for the closed-end fund treatment must satisfy the S$5 million AUM in DI requirement at the point of application. The grace period does not apply in this scenario.
The Circular also confirms that eligible funds may satisfy the entry condition based on committed capital. Once the entry condition has been met, the closed-end fund treatment does not impose an annual minimum AUM in DI requirement in subsequent years.
In comparison, there is no change to the minimum AUM in DI requirement for the S13U Scheme at S$50 million at the point of application with no grace period applicable.
A&M Observation The MAS introduced a minimum AUM in DI requirement of S$5 million for S13O/OA Scheme (effective from 1 January 2025), together with a grace period to meet this requirement by the end of the third year of assessment from the incentive award date allowing the funds to adapt with this new condition. Separately, a voluntary closed-end fund treatment[3] was also introduced from 1 January 2025 for the qualifying funds to meet the local business spending (“LBS”) condition on a cumulative basis up to the tenth incentive year (inclusive) and will be waived from the eleventh incentive year onwards. The funds intending to apply under S13O/OA Scheme and opt for closed-end fund treatment are able to rely on the committed capital concession for meeting the minimum AUM in DI of S$5 million at the point of application. However, the fund managers should note the eligibility requirements of the committed capital concession[4] and maintain the required supporting documentation. Where the funds are unable to meet the minimum AUM in DI requirement (including on a committed capital concession) and therefore, choose not to opt closed-end fund treatment at the time of application will not have the flexibility of meeting the LBS requirements on a cumulative basis or a waiver from eleventh year onwards. On the other hand, such funds will be able to enjoy the grace period for meeting the minimum AUM in DI of S$5 million. The funds should carefully assess the alternatives before filing the application to achieve the intended commercial objectives (e.g., investor obligations, ability to meet LBS requirements, timing of making investments, etc.). |
3. Closed-End Fund Treatment: Clarification for VCC and Consolidated S13U Scheme Structures
The MAS has clarified that umbrella fund structures such as Variable Capital Companies (“VCC”) are treated as a single legal entity for purposes of the closed-end fund treatment.
Similarly, the MAS has clarified incentive year will remain unchanged for an approved consolidated S13U Scheme fund structure that has been approved for the closed-end fund treatment where it subsequently adds or removes feeder funds / special purpose vehicles (“SPVs”) (i.e. the rolling period of 10 years continues and does not get reset).
A&M Observation This clarification provides greater certainty for fund managers using umbrella or consolidated fund structure, as the incentive period and economic conditions are assessed at the umbrella and consolidated level, respectively (with LBS aggregated across sub-funds or feeder funds/SPVs). In other words, the addition of new sub-funds or SPVs does not require a new incentive award or reset the incentive period, and the relevant LBS waiver and 20-year incentive period limits apply to the umbrella fund or consolidated fund structure as a whole. Although not specifically addressed in the Circular, the incentive year may be reset upon a conversion from the Section 13O/13OA Scheme to the Section 13U Scheme. |
4. Closed-End Fund Treatment: Clarification on cumulative LBS
The MAS has clarified that the minimum cumulative LBS condition is assessed on a year-by-year basis. Accordingly, if a non-SFO fund fails to meet the minimum cumulative LBS condition, it is unable to avail of the tax exemption in that year. The fund can avail the exemption in subsequent year subject to fulfilment of incentive conditions.
A&M Observation This clarification provides certainty that the tax incentive award will not be revoked in case the non-SFO fund is not able to meet the cumulative condition in a particular year during the incentive period. The impact is limited to non-tax exemption on income and gains earned by the fund in such year when the condition is not met. The non-SFO fund should be eligible to assess the tax treatment under the normal Singapore tax rules in such year. This also provides a clarity that the non-SFO funds should count the cumulative LBS on a forward-looking basis only. In other words, the expenses in a later year cannot be rolled-back for counting shortfall of cumulative LBS in a prior year. This is aligned to the MAS’ objective to provide flexibility to closed-end fund structures which are assumed to have a decrease in the LBS during the latter part of the fund’s lifespan as investments are divested, typically starting after the fifth year. |
5. Reminder on LBS Requirements
The Circular also serves as a timely reminder for non-SFO funds currently relying on grace periods to monitor their compliance with the revised LBS requirements. These requirements will become relevant from year of assessment 2028, corresponding broadly to funds with a financial year ending in 2027.
A&M Observation Fund managers should assess their existing operating models and projected Singapore spending levels early, particularly where they are relying on transitional relief or grace periods. Further, it should be noted that the total business spending (“TBS”) approach does not seem to apply where a fund has opted for the closed-end fund treatment under which LBS is required to be met on a cumulative basis. The Circular reiterates that the MAS may request supporting documentation, including to substantiate any proxies used to derive the LBS figure where components other than management fees cannot be directly identified. |
6. Co-Managing Arrangements
The MAS has clarified that a non-SFO fund approved under S13O/OA/U Scheme is permitted to have multiple FMCs co-managing the non-SFO fund, provided that the non-SFO fund meets all the relevant conditions, including the minimum required AUM in DI at the point of application and each FMC is Singapore based, fully responsible and accountable for the performance of its specific portfolio, and employs at least three (S13U Scheme) / two (S13O Scheme) qualifying Investment Professionals[5] (“IPs”).
A&M Observation This clarification provides flexibility and clarity to the investors and capital allocators to adopt co-managing arrangements to optimise the investment opportunities while maintaining compliance with the fund tax incentive conditions. It should be ensured that each FMC independently meets the minimum IP requirements. It should be noted that non-Singapore FMCs do not qualify as a co-managers. The MAS continues to recognise sub-delegation arrangements, where a Singapore-based FMC is allowed to sub-delegate some of the fund management activities to other investment managers or advisors (whether in Singapore or outside Singapore) so long as the first-mentioned Singapore-based FMC remains fully responsible for the entire management of the fund and is also held accountable to the investors for the fund’s performance. |
7. Restriction on Investments in Operating Businesses of the Family
The MAS has clarified that non-SFO funds are not permitted to hold investments in operating businesses of the family, whether through equity, debt or other financing arrangements. This applies where the operating business is owned, controlled or influenced by an individual investor of the fund, or by multiple investors who are members of the same family.
A&M Observation As non-SFO funds are required to have third-party investor participation, such funds would generally be owned by external investors. Accordingly, the restriction should generally not impact genuine non-SFO fund structures. Funds with capital contributed by a single family, that are managed by a licensed fund manager should take note of this restriction and review their downstream investments accordingly. We understand that MAS has issued surveys to certain non-SFO funds requesting information on whether they hold investments in operating businesses of the family. The MAS has indicated no immediate impact on existing tax incentive status but one cannot rule out the possibility of managers receiving enquiry-based reviews from the MAS. |
8. Reduced Filing Obligations for Foreign Investors
The MAS has clarified that foreign partners and investors of incentivised Singapore Limited Partnership funds under the Section 13OA/U scheme may not be required to file Singapore tax returns where the fund derives only tax-exempt income, subject to review and approval by the IRAS.
A&M Observation Based on the current administrative practice, the IRAS may grant filing waivers for foreign investors where it is satisfied that the investor is a non-resident, derives only qualifying tax-exempt income from the fund and does not derive other Singapore-sourced income. The MAS' formal recognition of this process provides greater transparency and consistency to fund managers when engaging with the IRAS. It should also help to streamline investor onboarding and tax representations on ongoing tax compliance and reporting obligations, while enhancing investor confidence when investing directly in Singapore Limited Partnership fund structures. However, the Circular does not clarify whether an approval granted by the IRAS applies for the life of the fund or is required to be obtained on a recurring basis. It would also be helpful if the MAS and the IRAS could establish and publish a set of objective criteria under which a filing waiver would generally be available, enabling eligible funds and investors to rely on such criteria without the need to seek approvals and alleviate administrative burden. |
9. Clarification on Third-Party Investor Requirement
The non-SFO funds are managed or advised by a licensed fund management company (“FMC”)[6]. The MAS has clarified that non-SFO funds under the Section 13O/OA/U Schemes must have capital contributed by third-party investors or demonstrate a bona fide intention to raise capital from third-party investors at the point of application. The “third-party investors” are investors who are not a “related party”[7] of the FMC.
A&M Observation This further clarifies the MAS' requirement that the Schemes for non-SFO funds are intended for fund managers managing or advising capital raised from external investors. In other words, these Schemes are not intended for groups or operating companies that establish and wholly own investment vehicles primarily to manage their own funds, support their own business operations or perform treasury functions. Fund managers should consider maintaining appropriate evidence of their intention to raise external capital, the steps taken to attract third-party investors (even where such efforts may not have ultimately resulted in investor subscriptions at a particular point in time) and any investor subscriptions obtained. It is recommended that the supporting documents are maintained on a contemporaneous basis such that they are readily available for submission to the MAS, upon enquiry, as MAS reserves the right to request supporting documentation. Failure to provide adequate supporting documents or not responding to requests from the MAS may result in the incentive being revoked. |
10. Clarification on Foreign-Sourced Income
The MAS has clarified that foreign-sourced income derived from DI qualifies as Specified Income (“SI”) where the income is both, derived and remitted to Singapore during the incentive period.
A&M Observation The MAS allows the non-SFO funds to apply for Schemes after they have made investments. This was permitted for S13U Scheme and was also recently liberalized for S13O/OA Scheme, recognizing that the funds may be required to make investments for commercial reasons (e.g., warehousing, manage liquidity or otherwise). Hence, there are scenarios where the date of commencement of the award under the Schemes is after an investment is made and potentially, after income is already earned or accrued. Similarly, there is a possible scenario that a fund earns or accrues income after it has terminated its award. Under the normal Singapore tax rules, certain foreign-sourced incomes (e.g., dividend and interests) are taxable in Singapore upon remittance or deemed remittance. The IRAS has issued detailed practice notes on how these conditions are to be interpreted with illustrations. The MAS has clarified that foreign-sourced income derived before the award commencement date, or remitted after the incentive period, will not qualify for tax exemption. The non-SFO funds should carefully assess the timing of applying for the incentive or the termination and track remittances, if required, to ensure foreign-sourced income (e.g. interest and dividends) qualifies for tax exemption under the Scheme. The MAS’ clarification on tax treatment for foreign-sourced income provides guidance on the intended tax outcome and alignment with the rules for the incentivised non-SFO funds. The non-SFO funds should also consider the accounting and tax treatment of the realised and unrealised gains on such investments to assess the overall tax implications. Where any income or gain does not qualify for tax exemption under the Scheme, the non-SFO funds are eligible to assess the tax treatment under the normal Singapore tax rules. |
11. Clarification on Guarantee Fees
The MAS has clarified that guarantee fee should qualify as SI where DI are used or lent as collateral to support debt financing or borrowing activities of other entities, provided the fund is primarily established for investment purposes and is not facilitating the activities of operating companies.
A&M Observation This is a useful clarification acknowledging that a non-SFO fund may be required to provide guarantee by collateralizing its DI to meet the financing requirements of other entities in the fund structure. Hence, guarantee fee income should be recognized for tax exemption. A non-SFO fund may similarly earn other financing-related income such as upfront fees, facility fees, commitment fees, etc. in relation to the funding of loans or debt, that constitute as DI. The fund managers should carefully assess the eligibility of such income for tax exemption under the Schemes based on the facts and circumstances of the arrangements. Similar guidance from the MAS will be welcome for consistency and clarity on the tax treatment of such income streams as the commercial terms of deal arrangements evolve beyond standard and traditional terms. |
12. Recognition of Tokenised Interests in DI
The MAS has clarified that tokenised interests in existing DI may qualify as DI, to the extent that the tokenised interest confers the same interests, rights and obligations as direct ownership of the underlying DI.
A&M Observation The recognition of tokenised interests in DI provides greater certainty for funds considering such investments. This clarification may enable fund managers to gain access to a broader range of investment products and support portfolio diversification. The fund managers should take a note that the clarification is for tokenised interests in assets that are already DI; it should not be interpreted to extend the DI definition itself. |
13. Removal of the 5% Cap on Physical Investment Precious Metals
With effect from 1 August 2026, the 5% cap on investments in physical investment precious metals has been removed from the list of DI.
A&M Observation This change increases investment flexibility for funds seeking exposure to physical precious metals and promote broader portfolio diversification strategies. Aligned to the MAS objective that the Schemes are not meant for operating companies, the MAS reserves the right to deny the tax exemption or revoke the award of a non-bona fide fund set up by retailers and manufacturers solely to invest in precious metals for shielding their profits from tax. Further, the separate cap of 15% of total trading volume in physical commodities continues to apply for commodity derivatives. |
Summary of Revised Economic Conditions for Non-SFO Fund
| Criteria | Section 13O/OA | Section 13U | Updates / Comments | ||||||||
| Profile/Type | |||||||||||
Legal Form and Tax Residency | Singapore tax resident Company or Singapore registered Limited Partnership. | Any form of legal entity and tax residency (subject to specific requirements for master fund for master-SPV and master-feeder-SPV for consolidated structures). | No change | ||||||||
Key Economic Conditions | |||||||||||
| IP Requirement | FMC must employ 2 IPs | FMC must employ 3 IPs | No change | ||||||||
AUM in DI | Minimum S$ 5 million AUM in DI subject to the applicable grace period (estimated 3 years from award date) and flexibility of committed capital concession. | Minimum S$50 million in AUM in DI at the point of application | The annual year-end minimum AUM in DI requirement has been removed with effect from 1 January 2025 for all Schemes. S$5 million AUM in DI condition must be met at the point of application for closed-end fund treatment without the grace period for S13O/OA Schemes (committed capital concession continues to be available, if required). | ||||||||
Local Business Spending (LBS) Requirement |
| No change, however, the grace period for (all) funds approved before 1 January 2025 and (S13O/OA Scheme) during 1 January 2025 to 31 December 2026 is scheduled to lapse for entities with financial year ending in 2027. | |||||||||
Looking Ahead
The latest changes reflect MAS' continued commitment to maintaining a fund tax incentive regime that is more closely aligned with commercial fund operating models.
In our view, the removal of the annual minimum AUM in DI requirement, together with the clarifications relating to the closed-end fund treatment, third-party investor requirement, and guarantee fee income, are among the most meaningful developments for private capital fund managers. These changes reduce compliance friction, improve certainty and further reinforce Singapore's commitment to transparency and clarity as a preferred domicile for regional and global investment funds.
Fund managers should consider reviewing existing and proposed structures to understand whether these enhancements could provide additional flexibility, improve operational efficiency or simplify compliance obligations going forward.
[1] Non-SFO funds refer to fund vehicles (including the feeder funds, master fund and the special purpose vehicles) which are not Single Family Office (“SFO”) funds. SFO funds refer to fund vehicles which consist of assets primarily originated from member(s) of the same family, and are managed by an SFO that is exempted from prescribed licensing requirements under the Securities and Futures Act 2001.
[2] Committed capital concession available, subject to eligibility and prescribed conditions.
[3] Non-SFO funds will be required to make a one-time election to opt for the closed-end fund treatment. The election, once made, is irrevocable (i.e. a fund cannot “switch” from the existing treatment to the closed-end fund treatment and vice versa).
[4] Broadly speaking, the committed capital concession is available to non-SFO funds deploying prescribed private capital strategies, where the terms of committed capital from the investors demonstrate high degree of certainty (conditions are prescribed) and a component of the manager's fees is charged on committed capital (including undrawn). The MAS may review arrangements relying on this concession, typically by Year 5 of the award.
[5] IPs, for the purposes of the S13O, S13OA and S13U schemes, refer to portfolio managers, research analysts and traders who are Singapore tax residents, earning more than S$3,500 per month and must be engaging substantially in the qualifying activity of fund management.
[6] The FMC must hold a capital markets services licence for the regulated activity of fund management under the Securities and Futures Act 2001 (“SFA”), or is exempt from the requirement to hold such a licence under the SFA.
[7] As defined in section 2 of the Singapore Income Tax Act 1947, a related party, in relation to a person (A), means any person: (a) who directly or indirectly controls A; (b) who is being controlled directly or indirectly by A; or (c) who, together with A, is directly or indirectly under the control of a common person.
Wealth & Asset Management Tax, Singapore
Mriganko Mukherjee, Neha Shah, Louis Tan, Jurmeth Tshering, Surbhi Jain, TingYi
