Legal
Wealth Management In Singapore: Key Updates

The international law firm sets out major developments, and explains continuing cases, that affect the work of private client advisors and wealth managers in Singapore.
The law firm Baker
McKenzie Wong & Leow, member firm of Baker McKenzie in
Singapore, outlines the latest developments important for private
client advisors and wealth managers focused on Singapore. This is
among an occasional series of updates already published by the
international law firm and this news service on developments in
Malaysia.
The individual authors of this article are Dawn Quek,
principal, Enoch Wan, senior associate, and Jaclyn Toh,
associate.
The editors of this news service are pleased to share these
insights. The usual editorial disclaimers apply about
contributions from outside. We invite readers to jump into the
conversation. Email tom.burroughes@wealthbriefing.com
and jackie.bennion@clearviewpublishing.com
Singapore
Changes to the Global Investor Programme
There have been some updates to the Global Investor Programme
("GIP"), which offers Singapore permanent residency ("PR") status
to individuals planning to invest and relocate to Singapore.
These new updates took effect for new GIP applications made on or
after 1 March 2020.
Updates to qualifying threshold criteria
(a) Established Business Owners. There has been an increase in
the minimum average annual turnover requirement (of the
applicant's existing business) from S$50 million to S$200
million. This criterion is in addition to the existing minimum
shareholding requirements, a proven business and entrepreneurial
track record, and the requirement for the applicant's company to
fall within a list of specified industries.
(b) Next Generation Business Owners. This new criteria requires
(i) the applicant's immediate family to be either the largest
shareholder or hold at least a 30 per cent shareholding in a
company that falls within a list of specified industries; (ii)
such company's minimum average annual turnover should be at least
SG500 million; and (iii) the applicant must be a part of the
management team of such company.
(c) Founders of Fast Growth Companies. This new criterion
requires the applicant to be a founder and one of the largest
individual shareholders of a company that falls within a list of
specified industries and has a valuation of at least S$500
million, and such company must also be invested into by reputable
venture capital/private equity firms.
(d) Family Office Principals. This newly published criteria
requires the applicant to possess some form of entrepreneurial,
investment or management track record, and to have net investable
assets (excluding real estate) of at least S$200 million.
Published investment options
Upon meeting one of the four threshold criteria above, applicants
then have the option of choosing to invest S$2.5 million into one
of three investment options. However, family office principals
may only choose to invest under Option C, which is to invest
S$2.5 million into a new or existing Singapore-based single
family office. If there are intentions to take advantage of
Option C, the applicant should also assess how the GIP
application may be aligned with the applications for tax
incentives (such as the Section 13X or 13R fund incentives).
There has largely been no change to the two previously published
investment options under the previous rules of (a) Option A:
Investing SGD 2.5 million into a new or existing business entity
or (b) Option B: Investing SGD 2.5 million into a GIP-approved
fund.
The third-year milestone requirement of a minimum additional
headcount and local business spending has now been removed.
Renewal criteria for PR status
Upon attaining GIP approval, and having made the requisite
investments within the specified timeframe, applicants and their
dependents will be able to obtain PR status for a period of five
years. Such PR status is subject to renewal criteria that has
recently been amended. Depending on the period of renewal (three
years or five years), the renewal criteria includes additional
headcount, increased local business spending as well as the
applicants or their dependents spending at least half their time
in Singapore.
2, Singapore extends and refines tax incentives for
venture capital funds and venture capital fund management
companies
Section 13H Incentive
Introduced in 1993, Section 13H of the Singapore Income Tax Act
(Cap. 134) ("ITA") seeks to encourage investments into
Singapore-based businesses and start-ups by providing a tax
exemption for eligible venture capital funds on qualifying income
streams ("Section 13H Incentive"). Pursuant to Singapore's Budget
2020, this incentive will be extended for another five years
until 31 December, 2025.
Key enhancements to the incentive are summarised as
follows.
To be approved under the Section 13H Incentive, the applicant
venture capital fund must fulfil the following conditions:
(a) have a minimum fund size of at least SGD10 million at the
time of application;
(b) attain sufficient localisation by having at least 30 per cent
of its invested capital invested into unlisted Singapore-based
companies by the fifth year of being approved as a Section 13H
fund, or by the end of the incentive period, whichever is
earlier;
(c) incur local business spending ("LBS") of at least SGD100,000
per year, multiplied by the incentive tenure (at the end of each
incentive year, the fund must have incurred cumulative LBS of at
least SGD100,000 multiplied by the number of years of incentive
enjoyed, but the requirement is met if the fund achieves the
total cumulative LBS target at any point during the incentive
tenure);
(d) satisfy any other conditions stipulated in the letter of
award; and
(e) The expansion of the categories of qualifying income
incentivised under the Section 13H Incentive will allow
participants far greater flexibility in structuring their
investments. As it is common for venture capital investments to
be funded by a mixture of debt and equity, the newly-introduced
list of "designated investments" for Section 13H, which includes
Singapore-sourced interest income, amounts to a significant
enhancement of the incentive.
Fund Management Incentive
Introduced in Budget 2015, the FMI offers a concessionary tax
rate of 5% to fund management companies managing Section
13H-approved funds. The concessionary tax rate will apply in
respect
of:
(a) management fees; and
(b) performance bonuses from managing funds approved under
Section 13H.
Like the Section 13H Incentive, the FMI has been extended until
31 December 2025. In addition, under Budget 2020, statutory
limitations on the total incentive tenure will be removed.
Instead, each FMI award will be subject to a maximum tenure of
five years, which may be renewable in tranches of up to five
years, subject to qualifying conditions.
For approvals or renewals under the FMI scheme on or after 1
April 1 2020, the fund manager must fulfil the following
conditions:
· manage at least SGD 40 million of assets under management of
Section 13H funds at the point of application or
renewal;
· hire at least one additional investment professional by the end
of the FMI award. For renewals, an incremental headcount of one
additional investment professional is required by the end of the
renewal tranche. The number of existing investment professionals
at the start of each incentive tranche must be maintained for the
entire award tenure.
There is no LBS requirement for the FMI.
3. COVID-19 administrative guidance on tax residency for
individuals and companies
The COVID-19 pandemic has brought significant disruption to
global cross-border movement. To address uncertainties in tax
positions that may have arisen from border closures and travel
restrictions, the Inland Revenue Authority of Singapore ("IRAS")
published administrative guidance on 6 April 2020 to provide a
clearer picture to both companies and individuals on their tax
position.
Tax residency status for individuals working remotely
from Singapore
(a) Singaporeans or Singapore Permanent Residents exercising
overseas employment and currently working remotely from
Singapore. IRAS is prepared to consider such individuals as not
exercising employment in Singapore for a limited timeframe where
the following conditions are met:
(i) there is no change in the contractual terms governing the
employment overseas before and after the individuals' return to
Singapore; and (ii) this is a temporary work arrangement due to
COVID-19.
Where these conditions are met, the individual will not be
considered as exercising employment in Singapore during the
period starting from the individual's date of return to
Singapore, unyil 30 September 2020. As such, the employment
income earned during that period will not be taxable in
Singapore.
(b) Non-resident foreigners exercising overseas employment who
are on a short-term business assignment in Singapore and are
unable to leave Singapore due to COVID-19. Such individuals may
also be working remotely from Singapore for their overseas
employers during this extended stay in Singapore.
IRAS is prepared to consider such individuals as not exercising
employment in Singapore during this period of extended stay,
where the following conditions are met:
(i) the period of the extended stay is not more than 60 days;
and
(ii) the work done during the extended stay is not connected to
the initial business assignment leading to the travel to
Singapore and would have been performed overseas but for
COVID-19.
Where these conditions are met, the employment income for this
period of extended stay will not be taxable.
Tax residency status for companies
Under the ITA, for a company to be resident in Singapore, the
control and management of its business has to be exercised in
Singapore. Thus, the location of the physical board meetings of a
company's directors is generally a key consideration in the
determination of tax residency.
Cognisant of the potential impact that COVID-19 travel
restrictions will have on board meetings, IRAS is prepared to
consider the company as a Singapore tax resident for Year of
Assessment ("YA") 2021, notwithstanding the fact that board
meetings are not held in Singapore due to the travel
restrictions, provided that all of thefollowing conditions
are met:
(i) the company is a Singapore tax resident for YA 2020;
(ii) there are no other changes to the economic circumstances
(e.g., principal activities, nature of business operations, usual
locations in which the company operates) of the company;
and
(iii) the directors are obliged to attend board meeting(s) held
outside Singapore or participate electronically (via video
conference) due to their movement being restricted by COVID-19
related travel restrictions.
Conversely, where a company is not a Singapore tax resident for
YA 2020, IRAS will continue to consider the company as a
non-resident for YA 2021, provided that (i) the company is
obliged to hold its board meeting(s) in Singapore due to the
travel restrictions in place; and (ii) there are no other changes
to the economic circumstances of the company.
Whether a company claims to be a Singapore tax resident or
otherwise, IRAS expects the company to maintain relevant records
and to provide the same to IRAS when requested.
4. Ernest Ferdinand Perez De La Sala v Compañía De
Navegación Palomar, SA and others [2020] SGCA 24
One of the largest trust law cases heard in Singapore, this case
concerns an underlying suit brought against Ernest Ferdinand
Perez De La Sala ("Ernest") by several related family companies
("the Companies") on grounds that Ernest had wrongfully, and in
breach of his fiduciary duties, transferred $600 million from the
Companies to his personal account.
Pursuant to the underlying suit, the Court of Appeal had earlier
granted (i) a worldwide Mareva injunction over assets in Ernest's
name, and (ii) a proprietary injunction compelling him to procure
the transfer of USD250 million to the Companies.
The present case concerned Ernest's application to vary the
proprietary injunction so that the assets held on trust by the
Companies can be released in the amount of $60,000 per week for
his living expenses and a lump sum of $6 million for legal
expenses. To this end, Ernest relied on Section 56 of the
Singapore Trustees Act (Cap. 337) ("Trustees Act") and/or the
inherent jurisdiction of the court. Section 56(1) of the Trustees
Act allows the court to empower trustees to perform an act,
otherwise unauthorised by the trust instrument, if the act is in
the court's opinion, expedient in the management or
administration of a trust.
The Court of Appeal dismissed Ernest's application. First, it
found that Section 56(3) of the Trustees Act only provides
trustees or beneficiaries of the trust with locus standi to apply
for relief under Section 56. Since Ernest was neither a trustee
nor adjudged a beneficiary of the trust, he had no standing to
apply for relief under Section 56 of the Trustees Act.
Secondly, it also held that its inherent jurisdiction to vary a
trust only fell within narrow and established classes of cases.
Since the facts did not concern such scenarios, the court
declined to exercise its inherent jurisdiction.
In sum, the Court of Appeal judgment helpfully elucidates the
circumstances in which a defendant can rely on the Trustees Act
and the court's inherent jurisdiction to withdraw funds seized
under a proprietary injunction for living, legal and other
expenses. With the court's interpretation of the Section 56(1) of
the Trustees Act and its exegesis of the common law position on
its inherent jurisdiction to vary trusts, it would appear that
that a relief of the type sought by Ernest would have little
prospect of success under these two legal grounds.