The Ultimate Guide To Setting Up A Fund In Singapore

Looking to navigate the burgeoning financial scene in Singapore with your own fund? You’re not alone; in recent years, Singapore has emerged as a leading investment hub in Asia. This guide simplifies the often complex process of setting up a fund, breaking it down into manageable steps and highlighting key regulations and incentives.

Intrigued? Let’s explore how you can make your mark on Singapore’s dynamic investment landscape!

Benefits of Setting Up a Fund in Singapore

Setting up a fund in Singapore offers numerous benefits, including being a tax-neutral location with an extensive network of double taxation agreements and being ideal for fund managers due to favorable regulations.

Tax-neutral location with a wide network of double taxation agreements

Singapore is a tax-friendly place for setting up a fund. It does not put a tax on the gains of foreign firms selling Singapore shares. So you get to enjoy more of your earnings! Also, you can wave goodbye to double taxation worries.

Singapore has more than 90 agreements with different countries that keep this from happening.

These deals are part of an international network that helps stop double taxing between nations. They make Singapore an efficient place for funds in terms of taxes. They also help foreign investment funds and aid in international tax planning.

This makes doing business across borders much easier.

Ideal for fund managers due to regulations

In Singapore, fund managers find the rules to be very fair. The laws here help them set up a good business model fast. Their goal is to manage money wisely for their clients. For this, they need clear guidelines and support.

Singapore’s topnotch regulatory environment helps out too. It makes sure all plays are fair in the game of money management. This leads to trust among investors who know their funds are safe.

Big rules may mean big costs at the start though, but there is a silver lining! The heavy cost upfront shows that you are serious about your business’ success long term. Even if it seems hard compared to Hong Kong, just think about what you stand to gain in end!

Different Ways to Structure a Fund in Singapore

When setting up a fund in Singapore, you have three different options for structuring it: unit trust, private limited company (Pte Ltd), or limited partnership. Each structure has its own advantages and considerations to keep in mind.

Unit Trust

In Singapore, a unit trust is one way to set up your fund. It’s like a shared money pot that uses a trust structure. The money pot or “fund” holds assets and gives earnings back to the people who put their money in it.

These people are known as “unit owners“.

A company manages the unit trust, and there is also a trustee. They follow rules set out in a special paper called a “trust deed”. Many folks choose unit trusts when they want to make private family funds in Singapore.

So remember, not all funds use this way but many find it quite helpful for managing assets.

Private Limited Company (Pte Ltd)

A private limited company, also known as a Pte Ltd, is one of the ways you can structure your fund in Singapore. It is the preferred option for funds investing in Asia. One big advantage of setting up a Pte Ltd is that Singapore has a wide network of double taxation agreements.

This means you can avoid paying taxes twice on your investment returns if your company is registered as a Pte Ltd.

Another reason why the Pte Ltd structure is popular for funds in Singapore is because it’s ideal for fund managers due to regulations. The rules and regulations governing fund management are well-established and provide clarity and stability for investors.

If you choose the Pte Ltd structure, you will have certain requirements to meet when setting up your fund management company (FMC). There are minimum base capital requirements that must be met, and there may be restrictions on the types of investors who can invest in your fund.

Limited Partnership

Limited partnerships are a popular choice for setting up funds in Singapore, especially for private equity and venture capital investments. In this structure, there is both a general partner (GP) and limited partners (LPs).

The LPs provide the capital for the fund, while the GP manages the operations. Limited partnerships are recognized globally as a common legal vehicle for these types of investments.

One advantage of using limited partnerships is that they offer flexibility in structuring private funds. They allow investors to participate without being involved in managing the fund’s day-to-day operations.

Additionally, limited partners have limited liability protection, meaning their personal assets are not at risk if something goes wrong with the investment.

Limited partnerships also operate as separate legal entities from their partners. This means that they can enter into contracts, sue or be sued in its own name.

Requirements for Setting Up a Fund Management Company (FMC)

To set up a Fund Management Company (FMC) in Singapore, you must meet the minimum base capital requirements and comply with investor type restrictions.

Minimum base capital requirements

To set up a Fund Management Company (FMC) in Singapore, you need to meet certain minimum base capital requirements. The amount of capital needed depends on the type of investors you plan to work with.

For most FMCs, the minimum base capital requirement is either S$500,000 or S$1 million. However, if you want to register as a Registered Fund Management Company (RFMC), the minimum base capital requirement is S$250,000.

Singapore company law does not specify a minimum paid-up share capital requirement for establishing an FMC. This means that you have flexibility when it comes to deciding how much share capital to start your company with.

It’s important to note that each RFMC must maintain a base capital of at least S$250,000 at all times. Additionally, if your FMC plans to offer a Collective Investment Scheme (CIS) and cater to retail investors, you will need a minimum base capital of SGD 500,000 or SGD 1 million.

Investor type restrictions

Fund Management Companies (FMCs) in Singapore have certain restrictions when it comes to the types of investors they can work with. There are two main categories of investors: qualified investors and non-qualified investors.

Qualified investors are individuals or entities that meet specific criteria set by the Monetary Authority of Singapore (MAS). They include institutional investors, such as banks and insurance companies, as well as accredited investors, who have a certain level of financial knowledge and experience.

On the other hand, non-qualified investors do not meet these criteria and may have limitations on their investments. FMCs in Singapore can choose to work with either all types of investors without any restrictions or limit their clients solely to qualified investors.

The decision depends on the business model and objectives of the FMC.

It’s important for FMCs to comply with these investor type restrictions as part of their licensing and registration requirements. This ensures that they operate within the guidelines provided by MAS and offer their services only to eligible clients who meet the necessary qualifications.

Applying for a Capital Markets Services (CMS) Licence or Registration

To legally operate a fund management company in Singapore, you will need to apply for a Capital Markets Services (CMS) licence or registration.

RFMCs

Registered Fund Management Companies (RFMCs) are an important part of the fund management industry in Singapore. These companies must meet specific admission criteria, qualifications, and staffing requirements to operate in the country.

RFMCs can be either registered or licensed fund management companies.

To become an RFMC, a business must either register with the Monetary Authority of Singapore (MAS) or obtain a Capital Markets Services (CMS) licence. The application for this licence or registration can be easily submitted online.

Once approved, the company can legally offer its fund management services in Singapore.

One advantage of choosing to set up an RFMC is that it allows you to tap into the wide network of double taxation agreements that Singapore has with other countries. This tax-neutral location makes it easier for investors and fund managers alike to access global markets while minimizing tax obligations.

LFMCs

Licensed Fund Management Companies (LFMCs) are fund management companies in Singapore that have obtained a Capital Markets Services (CMS) license to conduct regulated activities. LFMCs play a crucial role in the capital markets by managing funds and offering investment services to clients.

There are different types of LFMC licenses, including Retail LFMC, A/I LFMC, and RFMC.

To become an LFMC, a fund management company must meet specific admission criteria and qualifications set by the Monetary Authority of Singapore (MAS). This involves demonstrating financial stability, having competent personnel with relevant experience, and implementing robust risk management practices.

The application process can be simplified with the assistance of specialized services available for LFMC license applications.

LFMCs hold an important position in Singapore’s financial ecosystem as they contribute to the growth of the fund management industry. They provide investors with access to various investment opportunities while ensuring compliance with regulatory standards.

By obtaining an LFMC license, these companies gain credibility and trust from their clients.

Processing Time for Setting Up a Fund Management Company

Setting up a fund management company in Singapore takes an estimated time of around 4 months. The process involves obtaining the necessary licenses and registrations from the Monetary Authority of Singapore (MAS).

It is important to note that due to a high volume of applications, the review process may take up to 6 months. This means that it may take some time before you can start operating your fund management business.

However, with patience and proper preparation, you can navigate through the application process and establish your fund management company in Singapore.

Business Cessation of a Fund Management Company

When a fund management company in Singapore decides to close its operations, it goes through a process called business cessation. This means that the company ends its activities and terminates its business.

There are different reasons why a fund management company may decide to cease its operations, such as financial difficulties or changes in market conditions.

To formally cease the business of a fund management company, certain steps need to be followed. Firstly, the directors of the company must pass a resolution to wind up the affairs of the company.

They are also responsible for appointing a liquidator who will handle the process of winding up. The liquidator’s role is to ensure that all debts and liabilities are settled before distributing any remaining assets among shareholders.

It’s important to note that even after a fund management company has ceased operations, there can still be legal obligations that need to be fulfilled. For example, contracts with clients or service providers may need to be terminated properly and any outstanding regulatory requirements must still be met.

Overall, business cessation is an organized process where a fund management company ceases its activities and winds up its affairs under the guidance of appointed directors and liquidators.

Tax Incentives for Singapore Fund Management Companies

Singapore offers various tax incentives for fund management companies, including the GST Remission Scheme for Funds, the Financial Sector Initiative – Fund Management Award (FSI – FM), and the 13R, 13X, and 13CA schemes.

These incentives can help reduce overall tax burdens and make Singapore an attractive location for fund managers.

GST Remission Scheme for Funds

The GST Remission Scheme for Funds is a tax incentive program that allows qualifying investment funds in Singapore to claim remission on the Goods and Services Tax (GST) incurred. This scheme, which is in effect until 31 Dec 2024, aims to simplify the rules for claiming GST and encourage fund management activities in Singapore.

Under this scheme, investment funds resident in Singapore are required to file for a GST registration and can then claim back the GST paid on their expenses. By providing this incentive, the government hopes to attract more fund managers to set up operations in Singapore and promote the growth of the fund management industry.

Revised regulations regarding GST have been implemented since 1 April 2015 with the goal of removing disincentives for engaging Singapore Fund Managers (SFMs). These revised rules aim to streamline compliance requirements and provide greater clarity for SFMs operating under applicable licensing regulations.

Financial Sector Initiative – Fund Management Award (FSI – FM)

The Financial Sector Initiative – Fund Management Award (FSI-FM) is a tax incentive scheme offered by the Singapore government to support the growth of the fund management industry in the country.

Under this scheme, qualifying fund managers in Singapore can enjoy a concessionary tax rate of 10% on fee income derived from managing or advising a qualifying fund. The FSI-FM scheme is part of the broader Financial Sector Incentive (FSI) Scheme, which provides tax incentives for licensed financial institutions in Singapore.

Its aim is to promote fund management activities and attract and retain fund management companies in Singapore, contributing to the growth of the country’s financial sector. This scheme is administered by the Monetary Authority of Singapore (MAS).

13R, 13X, and 13CA Schemes

The 13R, 13X, and 13CA Schemes are tax incentives for fund management companies in Singapore. These schemes aim to attract fund managers to set up their operations in the country and boost the local fund management industry.

Under the Section 13R scheme, onshore funds can enjoy certain tax benefits. The Section 13X scheme is specifically designed for enhanced-tier funds, providing them with additional tax incentives.

On the other hand, the Section 13CA scheme focuses on offshore funds.

One important thing to note is that under both the 13X and 13R schemes, a single exemption is given to a Variable Capital Company (VCC) and covers all its sub-funds. This makes it easier for VCCs to benefit from these tax incentives.

Forming a Fund Management Company with a Trusted Partner

If you want to form a fund management company in Singapore, it can be helpful to have a trusted partner by your side. Companies like Waystone Compliance Solutions, Rikvin, and Argus specialize in assisting with the launch and registration of fund management companies.

They provide expert guidance and assistance in setting up funds and investment fund structures in Singapore. These partners have experience and expertise in navigating the complex regulations surrounding fund management in Singapore.

They can also help ensure that your management team, parent company, and major shareholders meet the necessary fitness and propriety requirements set by authorities. By partnering with these trusted companies, you can increase your chances of success when forming a fund management company in Singapore.

Conclusion

Setting up a fund in Singapore can be a smart choice for fund managers. With its tax-neutral location and strong regulations, it offers many benefits for international fund distribution.

There are different ways to structure a fund in Singapore, such as unit trusts or private limited companies. Setting up a fund management company requires meeting certain requirements and obtaining the necessary licenses.

Tax incentives are also available for Singapore fund management companies. If you’re considering setting up a fund in Singapore, partnering with a trusted expert can make the process easier.

FAQs

1. What is a fund and why would I want to set one up in Singapore?

A fund is an investment vehicle where money from multiple investors is pooled together for investment purposes. Setting up a fund in Singapore can provide opportunities for diversification, tax benefits, and access to Singapore’s well-regulated financial market.

2. Who can set up a fund in Singapore?

Both individuals and corporations can set up funds in Singapore, but they must meet certain eligibility criteria such as having a reputable track record or engaging the services of an approved fund management company.

3. What are the steps involved in setting up a fund in Singapore?

The steps involve selecting the appropriate legal structure, preparing the necessary documents, obtaining regulatory approvals when required, appointing service providers like custodians or administrators, and complying with ongoing reporting requirements.

4. Are there any specific regulations or guidelines that govern funds in Singapore?

Yes, funds operating in Singapore are regulated by various authorities such as the Monetary Authority of Singapore (MAS). They must comply with regulations related to licensing, disclosure of information to investors, anti-money laundering measures, and other governance requirements.

5. How long does it take to set up a fund in Singapore?

The time taken may vary depending on factors such as the complexity of the structure chosen and regulatory approval processes. It typically takes several weeks to months to complete all necessary steps involved in setting up a fund.