Designated Investments Under the Section 13O and 13U Schemes: What a Family Office Fund Can Hold

A Section 13O or 13U award does not make everything a family office fund earns tax-free. The exemption covers “specified income” from “designated investments”, two lists set by MAS. Listed and overseas shares, bonds, deposits, most funds, derivatives, overseas property and, from 1 August 2026, physical investment precious metals without the old 5% cap are designated investments. Singapore property, and unlisted companies that trade or hold Singapore property, are not. Income from non-designated assets is outside the exemption, and those assets do not count towards the fund’s AUM.

Raffles Corporate Services works with a panel of experienced Singapore law firms who offer cost-effective and efficient legal service and advice. This article is general information only and is not legal advice.

This guide is for family office principals, fund directors and finance teams who need to classify a fund’s portfolio before each year-end.

What do “designated investments” and “specified income” mean?

The Section 13O, 13OA and 13U schemes exempt a qualifying fund from tax on specified income derived from designated investments, provided the fund meets the scheme conditions throughout the relevant basis period (the financial year before the year of assessment).

• Designated investments (DI) are the asset classes on MAS’s list. The current list, which applies on or after 1 August 2026, is in Annex 3 of MAS Circular FDD Cir 05/2026 on tax incentive schemes for funds.
• Specified income (SI) is the income or gains from those investments that qualify for exemption. Most income from a DI is SI, but a few types of distribution are carved out even when the underlying asset is a DI.
• AUM in DI is the value of the fund’s investments that qualify as DI. Since 1 January 2025, any reference to a fund’s AUM under these schemes means its AUM in DI, not the total portfolio.

So classification matters twice. It decides which income is exempt, and it decides whether the fund clears the minimum AUM threshold. If you are still deciding between the two schemes, start with our guide to setting up a family office under Section 13O or 13U.

Which assets qualify as designated investments?

The MAS list is long. These are the categories a family office fund is most likely to hold:

• Stocks and shares of any company, listed or unlisted, except an unlisted company that trades or holds Singapore immovable property (property developers are not caught by this exception)
• Debt securities such as bonds, notes, commercial papers, treasury bills and certificates of deposit, with the same Singapore property carve-out for non-qualifying debt securities
• Units in REITs, exchange traded funds structured as trusts, and most unit trusts
• Deposits with any financial institution, and foreign exchange transactions
• Futures on futures exchanges, and interest rate, currency and other financial derivatives relating to a DI or a financial index
• Immovable property situated outside Singapore
• Loans, including secondary loans and credit facilities, subject to the property exclusions below
• Commodity derivatives, emission allowances (MAS confirms carbon credits fall here), freight derivatives and structured products
• Private trusts that invest wholly in DI, and partnerships or limited liability companies that do not carry on a business in Singapore (non-publicly traded partnerships must also invest wholly in DI)
• Physical investment precious metals. Before 1 August 2026 these counted only up to 5% of the portfolio; MAS removed that cap from 1 August 2026
• Equity interests in real estate investment funds of any form, other than those investing in Singapore property

MAS also confirms that tokenised interests in an existing DI qualify, as long as the token gives the same rights as owning the underlying asset directly.

Which assets are not designated investments?

The exclusions mostly target Singapore property, held directly or indirectly:

• Singapore immovable property held directly. Only property outside Singapore appears on the list.
• Shares, non-qualifying debt securities and other securities of an unlisted company that trades or holds Singapore immovable property, unless that company’s business is property development.
• Unit trusts that invest in Singapore immovable property, hold securities in such unlisted property companies, or make excluded loans.
• Loans to such unlisted property companies, loans to finance or refinance the purchase of Singapore immovable property, and loans used to buy securities in those companies.
• Physical commodities (other than investment precious metals), unless the trading is incidental to commodity derivatives trading and stays within the 15% volume limit set by MAS.

Anything not on the list, such as artwork, wine, classic cars or a Singapore holiday flat, is also outside the scheme.

Is all income from a designated investment exempt?

Not always. Under the circular, income from a DI is SI except for:

1. Distributions from the trustee of a REIT listed on the Singapore Exchange. Gains on selling or revaluing the listed REIT units are SI, but the distributions are not.
2. Distributions from a trustee of a Singapore-resident trust (or one with a permanent establishment in Singapore), other than trusts exempt under specified sections such as 13D or 13U.
3. Singapore-sourced income from a partnership or limited liability company where Singapore tax is paid or payable on it, by deduction or otherwise.

Two timing rules are also worth knowing. Foreign-sourced income from a DI counts as SI only if it is both derived and remitted to Singapore during the incentive period. And losses on DI are disregarded: they cannot be set off against the fund’s other taxable income.

What happens if the fund holds non-designated assets?

The exemption is limited to SI from DI, so income from a non-designated asset is not covered and is assessed under the normal income tax rules in the fund’s return. Rent from a Singapore apartment held directly by the fund is the usual example.

The bigger risk is often the AUM test. For new single family office (SFO) awards approved on or after 1 August 2026, the fund must have at least S$20 million of AUM in DI (Section 13O or 13OA) or S$50 million (Section 13U) at application and at the end of each basis period. Non-designated assets do not count. If AUM in DI falls below the threshold at a year-end, the fund cannot claim the exemption for that basis period. It can claim again in a later year if it meets every condition then.

A separate rule applies to the family’s own businesses. An SFO fund may invest in operating businesses of the family, but those investments do not count towards the minimum AUM in DI. They still count for other conditions, such as local spending and the capital deployment requirement, if they qualify as DI. Our article on separating family operating-business investments in fund AUM calculations works through that split.

MAS also expects these funds to serve investment purposes only. A structure that is mainly a long-term holding company for operating businesses, or that runs treasury for an operating group, falls outside what the schemes are meant for.

Example: classifying a hypothetical SFO fund portfolio

Example (hypothetical): A Section 13O SFO fund has a 31 December year-end and an award approved after 1 August 2026. At 31 December, its finance team classifies the portfolio as follows.

The fund holds S$28.5 million in total, but only S$19 million counts towards the S$20 million minimum. Under the 2026 conditions, it cannot claim the exemption for that basis period, even for its equity and bond income, unless it fixes the shortfall before year-end. The two property holdings also produce taxable income whatever the AUM position. The fix is a decision on the portfolio, for example moving the Singapore property outside the fund or adding DI, taken before year-end and documented. It is not a reclassification done afterwards.

How should a family office keep classification records?

MAS can ask for supporting documents on AUM in DI, investment professionals, strategy and structure. A fund that cannot produce them risks having its award terminated. Each fund also submits an Annual Declaration to MAS within four months after its basis period ends; a missed declaration means no exemption for that year of assessment. A practical routine:

1. Keep an investment register that tags every holding as DI or non-DI, with the paragraph of the MAS list relied on.
2. Look through property exposure. For unlisted companies, unit trusts and loans, record whether the investee trades or holds Singapore immovable property and whether it is a property developer.
3. Flag family operating businesses separately, so they can be excluded from the minimum AUM test but included for other conditions.
4. Value DI at each year-end using the custodian statements and valuation reports, and keep a reconciliation to the financial statements.
5. Tag income streams in the ledger as SI, non-SI from a DI (for example SGX-listed REIT distributions) or income from non-DI.
6. Track remittances of foreign-sourced income so you can show it was derived and remitted during the incentive period.
7. File minutes for decisions to buy, transfer or dispose of non-DI assets, and the reason for each.

Document checklist for year-end

• Investment register with DI classification and the MAS list reference
• Custodian and bank statements at the basis period end
• Valuation reports for unlisted holdings and overseas property
• Look-through notes for unlisted companies, partnerships, LLCs and real estate funds
• Income schedule split into SI, non-SI and non-DI income
• Remittance records for foreign-sourced income
• Annual Declaration and supporting calculations

How does classification affect the fund’s tax computation?

The fund still files a corporate income tax return. The tax computation should show SI from DI as exempt and bring non-SI and non-DI income into the chargeable income calculation. Expenses also need care: the costs of earning taxable income may be deductible against that income, while costs of earning exempt income are not. Where expenses serve both, an apportionment method has to be chosen, applied consistently and documented. Because DI losses are disregarded, a loss on listed shares cannot reduce tax on rental income from a Singapore property held in the same fund.

If the fund is a Variable Capital Company, the same classification applies to each sub-fund that holds its own award. Our explainer on what a VCC is and who it suits covers the structure, and the MAS page on fund tax schemes for family offices sets out the SFO conditions. For a wider view on structure, see our comparison of single and multi-family offices.

Frequently asked questions

Can a Section 13O fund own a Singapore residential property?

Nothing in the circular stops it, but the property is not a DI. Rental income and gains are outside the exemption, and the value does not count towards AUM in DI. Many families hold Singapore property outside the fund for this reason.

Are shares in a Singapore property developer designated investments?

Generally yes. The exclusion catches unlisted companies that trade or hold Singapore immovable property, but expressly leaves out companies whose business is property development. Listed shares are DI regardless. Record the investee’s business activity to support the classification.

Does holding a non-designated asset cancel the award?

The circular deals with it through the exemption itself: income from the asset is not exempt, and the asset does not count towards AUM in DI. The award is at risk if the fund fails conditions, stops serving an investment purpose, or cannot provide supporting documents when MAS asks.

Are SGX-listed REIT distributions exempt in a 13O or 13U fund?

No. Listed REIT units are DI, so disposal and fair value gains are SI. Distributions from the REIT trustee are carved out of SI, and MAS notes that the fund is liable to tax on the taxable part of those distributions.

Do the old conditions still apply to an award approved before 1 August 2026?

The circular applies its revised SFO economic conditions to new awards approved on or after 1 August 2026, unless MAS notifies otherwise. The updated DI list applies from 1 August 2026. Check your letter of award, and any MAS notice, for the conditions that apply to your fund.

Need help with your fund’s designated investments?

Raffles Corporate Services can maintain your fund’s DI classification register, prepare the year-end AUM in DI working, keep the company and VCC registers, and prepare the corporate tax computation with the exempt and taxable income split out. Contact us at [email protected] or on WhatsApp at +65 8501 7133. This article is general information, not tax or legal advice.

Kevin Yeo, Raffles Corporate Services