Singapore Budget 2019 Extension and Enhancement to Fund Tax Incentive Schemes

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1 Singapore Budget 2019 Extension and Enhancement to Fund Tax Incentive Schemes March 2019 SINGAPORE HONGKONG 25 YEARS IN PRACTICE

2 Schemes have been extended and enhanced In the Singapore 2019 Budget delivered on 18 February 2019, it was announced that the tax concession schemes under Section 13CA, 13R and 13X relating to Qualifying Funds will be extended for another 5 years, till 31 December In addition, the schemes have been enhanced, allowing the schemes to apply to a much wider set of scenarios. SCHEMES HAVE BEEN ENHANCED We set out some of the key enhancements and changes. Further details of the changes and specific terms will be released in the next few months. 2

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4 Removal of Investor Restriction One of the most important changes made to S13CA and S13R is the removal of the existing restriction on investor ownership of the fund (where no more than 100% of the fund could be owned by Singapore persons). With the removal of this condition, Singapore based family offices who were not able to meet the higher requirements under S13X, may now consider alternative solutions under S13CA or S13R. REMOVAL OF INVESTOR RESTRICTION This change will be effective from YA

5 Broader Application of the Enhanced Tier Fund Scheme A number of changes made to the S13X Scheme will allow it to apply in a wider set of scenarios. The S13X scheme previously could only apply to a relatively narrow set of master-feeder and SPV structures. A BROADER S13X SCHEME Following the changes, the scheme can now be applied to coinvestment vehicles, non-company SPVs and more than 2 tiers of SPVs under the master fund vehicle. This is a welcome change in response to industry feedback and will permit the use of 13X for structures commonly used throughout the funds industry. 5

6 Broader Application of the Enhanced Tier Fund Scheme The committed capital concession allows funds to satisfy the S$ 50mil fund size requirement based on committed capital, rather than actual invested capital. The concession which was previously given only to private equity, real estate and infrastructure funds, has been extended to include debt and credit funds. A BROADER S13X SCHEME The above enhancements under the S13X Scheme will apply from 19 February 2019 onwards. 6

7 Expansion of the List of DIs Previously, various counter-party and currency restrictions are imposed on instruments (e.g. securities and loans) for them to be qualified as designated investments ( DIs ). Instruments that did not meet these conditions in the past may now qualify as DIs as these conditions will be removed. Expansion of the List of DIs Funds invested into credit facilities and advances, and Islamic financial products (that are commercial equivalents of DI) will benefit from the expansion of the DI list to include such investments. Further, the requirement for unit trusts to be wholly invested in DIs will also be removed. The above changes will apply to income derived on or after 19 February

8 Inclusion of Singapore Sourced Interest Income Another key change introduced is the inclusion of Singapore sourced interest income within Specified Income. This exempts all Singapore sourced interest income earned by funds under the S13CA, S13R or S13X schemes (which are exempted from Specified Income from Designated Investments). This will apply to interest income earned from 19 February 2019 onwards. ADDITION TO THE LIST OF SPECIFIED INCOME 8

9 Extension of the GST Scheme Under the GST remission scheme, qualifying funds can claim GST incurred on expenses at a fixed recovery rate that is determined annually by IRAS. It has been announced that the GST remission scheme for qualifying funds will be extended for another 5 years, until 31 December The fixed recovery rate for 2019 is 87%. EXTENSION OF GST SCHEME Conclusion: The changes underline the Singapore government s intention to continue to grow Singapore s asset management industry, and should be welcomed by the industry. 9

10 Services: SERVICES International & Domestic Tax Company Formation & Administration Trusts & Foundations Immigration & HR The insight to be your trusted adviser Regulatory & Compliance Accounting & Financial Reporting 10

11 Contact Us Shanker Iyer Phone Mobile Sunil Iyer Phone Mobile Raffles Place #27-00 Republic Plaza Singapore Raffles Place #27-00 Republic Plaza Singapore CONTACT US Sanjay Iyer sanjay@iyerpractice.com Phone Mobile Unit , 6/F Wing On Centre 111 Connaught Road Central Hong Kong Read our free publications at iyerpractice.com. For the latest business/finance related updates, follow us on : Disclaimer: This presentation of slides is intended as a general guide only, and the application of its contents to specific situations will depend on the particular circumstances involved. Accordingly, readers should seek appropriate professional advice regarding any particular problems that they encounter, and this presentation should not be relied on as a substitute for this advice. While all reasonable attempts have been made to ensure that the information contained in this presentation is accurate, Iyer Practice accepts no responsibility for any errors or omissions it may contain, whether caused by negligence or otherwise, or for any losses, however caused, sustained by any person that relies on it. 11

Extension of Enhanced Tier Fund Tax Incentive Scheme

Extension of Enhanced Tier Fund Tax Incentive Scheme June 2015 SINGAPORE HONGKONG 20 YEARS IN PRACTICE Introduction Previously the Enhanced Tier Fund Scheme (13X) only applied to the fund vehicle or to