The Section 13U enhanced-tier fund scheme exempts qualifying income of a fund of at least
S$50 million that is managed by a Singapore-based fund manager, with no restriction on where the
fund is incorporated. Rejections usually come down to three things: missing the fund-size floor,
too few genuine investment professionals, and local substance that does not match the scale of the
assets.
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 the enhanced-tier fund exemption. Its defining
features are a higher minimum fund size and flexibility on the fund’s legal form and place of
incorporation, which is why larger and more internationally structured family funds gravitate to it.
Like the 13O scheme, the exemption is granted by MAS on application and carries conditions that
continue for the life of the fund.
Who Section 13U is for
The scheme suits families whose fund clears the S$50 million floor and who want the freedom to
hold the fund in a structure other than a Singapore company, including a Variable Capital Company or
an offshore vehicle managed from Singapore. Families weighing the fund vehicle should read the group
guide on
VCC permissible fund manager rules under Section 46 of the Variable Capital Companies Act 2018,
because the manager rules interact directly with the 13U conditions.
Eligibility and requirements
As a 2026 working guide, the 13U route expects a minimum fund size of S$50 million at the point of
application, a minimum of three investment professionals with at least one who is not a family
member, tiered local business spending typically from S$500,000 to S$1 million a year, and a local
investment commitment of around 10% of assets or S$10 million, whichever is lower. The fund does not
need to be incorporated in Singapore, but it must be managed by a Singapore-based manager. These
thresholds are periodically revised, so the current MAS conditions should be confirmed before you
apply.
Cost and timeline
Professional fees to structure a 13U fund and its family office typically run from S$50,000
upward, reflecting the larger scale and more complex structures. Annual local business spending
starts higher than under 13O, from around S$500,000. MAS review of a complete application generally
falls in the 12 to 24 week range, with incomplete filings taking longer. Because the fund size floor
is absolute, the most common cause of a stalled 13U application is committing capital that has not
actually landed by the time MAS reviews the file.
Step-by-step
Confirm the fund size clears S$50 million with committed, evidenced capital. Choose and establish
the fund vehicle and the Singapore-based manager. Appoint the three investment professionals and
document their roles. Prepare the higher local business spending budget and the local investment
plan. File with MAS and answer queries with primary evidence. After approval, meet the annual
conditions and file the yearly declaration. Families that build the investment team before filing,
rather than promising to hire after approval, clear review far more smoothly.
Section 13U compared with 13O and the offshore regime
The choice between schemes drives the whole application. Section 13U of the Income Tax Act 1947,
the enhanced-tier scheme, requires a fund of at least S$50 million but allows the fund to be
incorporated outside Singapore, provided a Singapore-based manager runs it. Section 13O of the Income
Tax Act 1947 carries a lower threshold but requires a Singapore-incorporated, tax-resident fund.
Section 13D of the Income Tax Act 1947 applies to offshore funds not resident in Singapore. Larger
families and those with cross-border structures usually land on 13U precisely because of the
flexibility on fund form. The mistake is to reach for 13U’s flexibility when the fund cannot actually
meet the S$50 million floor, which stops the application before the substance questions are even
reached.
Local investment and business spending in detail
Two conditions carry most of the 13U compliance weight. Local business spending is tiered by fund
size and, as a 2026 guide, generally runs from S$500,000 to S$1 million a year, covering items such
as management fees paid to the Singapore manager, local salaries, and professional and operating
costs incurred in Singapore. The local investment condition, around 10% of assets or S$10 million,
whichever is lower, is met through defined categories: Singapore-listed equities, qualifying debt
securities, funds distributed by Singapore-licensed or registered managers, and private equity into
non-listed Singapore companies, with weighted recognition for certain blended-finance and
climate-related investments. Because 13U funds are larger, the absolute dollar figures are bigger,
and under-budgeting either condition is a common and costly oversight.
Choosing the fund vehicle for a 13U fund
Since 13U does not tie the fund to a Singapore company, families have real choice of vehicle,
including a Variable Capital Company (VCC) or an offshore structure managed from Singapore. The
vehicle decision interacts with the manager rules and with the family’s wider tax and succession
planning, so it should be taken alongside the incentive application rather than after it. Over-
engineering the vehicle is as much a risk as under-thinking it; the right structure is the simplest
one that meets the family’s genuine needs and the scheme’s conditions.
The annual declaration and keeping the exemption
A 13U exemption is conditional for the life of the fund. Each year the fund must continue to meet
its fund-size, staffing, local spending and local investment conditions, evidence them, file the
annual declaration to MAS and report for tax to IRAS. The larger scale of a 13U fund makes the
record-keeping heavier, not lighter: payroll for at least three investment professionals, invoices and
ledgers for higher local spending, and statements for the qualifying investments all need to be
retained. The recurring post-approval failure is a quiet year where local spending slips below the
required tier; a named compliance owner and an annual calendar are the practical safeguards.
Worked example: sizing a 13U fund
Consider a family bringing S$60 million into Singapore. It confirms the capital is committed and
evidenced so the fund clears the S$50 million floor at application, not merely on a promise to fund
later. It appoints three investment professionals, at least one of whom is not a family member, on
genuine paid contracts. It budgets S$600,000 a year of local business spending, reflecting the higher
tier that applies at this scale, covering local salaries, the Singapore manager’s operating costs and
professional fees. It plans to place around S$6 million, roughly 10% of assets, into qualifying local
investments. It selects a fund vehicle, whether a Singapore company, a Variable Capital Company or an
offshore structure managed from Singapore, that fits the family’s wider planning. On this footing the
file evidences the fund-size floor, a credible three-person investment team, the correct local
spending tier and a mapped local investment plan. These figures are illustrative for 2026 and should
be confirmed against the prevailing MAS conditions before filing.
Common mistakes and rejection reasons
The usual failures are: filing before the fund actually reaches S$50 million; presenting fewer
than three credible investment professionals, or three in name only; under-budgeting the higher
local business spending; treating the local investment requirement as optional; and choosing 13U
when the assets and structure would sit more naturally under 13O or the offshore regime. Post-approval,
the recurring error is letting local spending slip below the required tier in a quiet year, which
puts the exemption at risk.
Our detailed checklist is at
Section 13U enhanced-tier fund scheme: documents required and templates,
and the manager-framework angle is covered in
the MAS streamlined fund manager framework 2026.
For the principal’s residency planning, see
Singapore PR application strategy.
FAQs
What is the minimum fund size for 13U? At least S$50 million at application, as a
2026 guide. Confirm the current MAS condition before filing.
Does the 13U fund have to be a Singapore company? No. Section 13U of the Income
Tax Act 1947 does not restrict the fund’s place of incorporation, provided a Singapore-based manager
runs it.
How many investment professionals are needed? Generally three, with at least one
who is not a family member. Substance, not titles, is what MAS assesses.
What is the local spending expectation? Typically from S$500,000 to S$1 million a
year, tiered by fund size.
How long is approval? Roughly 12 to 24 weeks for a complete application.
Authoritative sources: the MAS
family office tax incentive schemes,
the Inland Revenue Authority of Singapore, and the EDB
Global Investor Programme.
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.