The Section 13U enhanced-tier fund scheme is a Singapore tax incentive that exempts qualifying income of larger fund vehicles, including those used by family offices, from Singapore tax. Administered by the Monetary Authority of Singapore under the Income Tax Act 1947, it carries higher thresholds than Section 13O but offers greater flexibility on fund form, size and investor base.
Raffles Corporate Services works with a panel of corporate and employment law firms; this article is general information, not legal advice.
What the Section 13U enhanced-tier fund scheme is
Section 13U of the Income Tax Act 1947 establishes an exemption on specified income of an approved fund managed by a Singapore fund manager. Formerly the 13X scheme, it accepts a wider range of fund vehicles, including companies, limited partnerships and variable capital companies, and it does not cap the number of investors.
For family offices it is the natural step up from Section 13O once assets and complexity grow, or where the family wants to use a fund structure that Section 13O does not permit.
Eligibility and requirements checklist
- Minimum fund size of S$50,000,000 in designated investments at the point of application.
- At least three investment professionals, with at least one who is not a family member.
- Minimum annual local business spending, tiered by fund size, commonly S$500,000 to S$1,000,000.
- A local investment requirement of 10% of AUM or S$10,000,000, whichever is lower.
- A Singapore-based fund manager and, for family office use, genuine local management substance.
- Audited financial statements and annual reporting to MAS.
Cost and timeline
Setup and application drafting typically cost S$12,000 to S$25,000, with annual compliance of S$60,000 to S$180,000 given the larger audit and reporting scope and the greater number of investments usually held. MAS review generally takes three to six months from a complete submission, similar to Section 13O.
Tax treatment in numbers
Against Singapore’s 17% headline corporate tax rate, the exemption on a S$50,000,000-plus portfolio can shelter a substantial annual return from tax. The larger the qualifying income, the more the fixed running cost of the enhanced-tier office is justified, which is why 13U is favoured by families whose assets and income have outgrown the 13O thresholds.
Section 13U versus Section 13O for family offices
Section 13U suits families above S$50,000,000 in assets, those who want to use a variable capital company or limited partnership, or those planning to admit non-family co-investors. Section 13O remains simpler and cheaper for smaller, single-family pools. Some families begin on 13O and migrate to 13U as assets grow, which requires a fresh application rather than an automatic upgrade.
Step-by-step process
- Confirm target AUM of at least S$50,000,000 and the chosen fund vehicle.
- Incorporate the fund and the fund manager entity with ACRA.
- Hire at least three investment professionals under Singapore employment contracts.
- Prepare the Section 13U application and submit it to MAS.
- On approval, claim the exemption in the corporate tax return and maintain audit, reporting and local-spend conditions annually.
Common mistakes to avoid
The usual pitfalls are applying before the fund reaches S$50,000,000, treating the local investment requirement as optional, and failing to build enough management substance in Singapore. MAS reviewers expect genuine local decision-making, not a nameplate arrangement, and will probe how investment decisions are actually made and by whom.
Documents and substance reviewers expect
A Section 13U application should evidence the S$50,000,000 deployment, contracts for at least three investment professionals, a local spending budget in the S$500,000 to S$1,000,000 range, and a clear description of how and where investment decisions are made. Because 13U funds are larger and more visible, MAS pays close attention to genuine Singapore substance.
Migrating from Section 13O to Section 13U
Families that started on Section 13O and have grown beyond S$50,000,000 do not upgrade automatically. A fresh Section 13U application is required, and the higher headcount and spending conditions apply from approval. Planning the transition a year ahead, so professionals are hired and the budget is in place, avoids a period where neither incentive is cleanly satisfied.
Related guides
- VCC 13U enhanced-tier — application and conditions — Costs and fees breakdown
- Family office hiring under 13O / 13U / GIP — Costs and fees breakdown
- Section 13U enhanced-tier fund scheme — Timeline and processing benchmarks
Official sources and further reading
- MAS — Fund tax incentive schemes for family offices
- IRAS — Inland Revenue Authority of Singapore
- EDB — Global Investor Programme
FAQs
What is the minimum fund size for Section 13U?
S$50,000,000 in designated investments at the point of application.
Can a variable capital company use Section 13U?
Yes; the enhanced-tier scheme accepts companies, limited partnerships and variable capital companies.
How many investment professionals does Section 13U require?
At least three, with at least one who is not a family member.
Is Section 13U better than Section 13O?
Neither is universally better; 13U suits larger and more flexible structures, while 13O is simpler and cheaper for smaller single-family pools.
What was Section 13U called before?
It was previously known as the Section 13X scheme before the Income Tax Act was renumbered.
Need help with this? Call, SMS or WhatsApp +65 8501 7133, or email [email protected]. Raffles Corporate Services works with a panel of corporate and employment law firms; this article is general information, not legal advice.