Section 13O tax incentive scheme : full lifecycle : Decision tree : should you choose this

The Section 13O tax incentive scheme is a fund tax exemption under the Income Tax Act 1947 for Singapore-incorporated funds managed by a locally based family office or fund manager, typically requiring a minimum of S$20 million in assets under management. It suits families and fund sponsors who want tax-exempt treatment on specified income without the higher AUM commitment of Section 13U.

Raffles Corporate Services works with a panel of corporate and employment law firms; this article is general information, not legal advice.

What the Section 13O scheme is

Section 13O of the Income Tax Act 1947 (formerly numbered 13R) is the onshore fund tax incentive scheme administered jointly by the Monetary Authority of Singapore (MAS) and the Inland Revenue Authority of Singapore (IRAS). A qualifying fund, usually incorporated as a Singapore company or a Variable Capital Company (VCC), can obtain tax exemption on specified income from designated investments, provided the fund and its manager meet a set of substance conditions: a minimum AUM at application, a minimum number of local investment professionals, and a minimum level of local business spending. It sits alongside two related schemes: Section 13U of the Income Tax Act 1947, the enhanced tier scheme for larger funds, and Section 13D of the Income Tax Act 1947, the resident fund scheme aimed at offshore funds.

Section 13O is most commonly used by single family offices and smaller independent fund managers whose AUM does not yet justify the higher commitment of Section 13U, but who still want the certainty and reputational benefit of a MAS-recognised tax incentive rather than relying on general tax provisions alone.

Mechanically, the exemption operates on “specified income” derived from “designated investments”, a defined list that covers most mainstream asset classes including listed and unlisted securities, futures contracts, foreign exchange, deposits and units in collective investment schemes, among others. Income falling outside the designated investments list, or income from activities that stray into trading rather than investing, may not qualify for the exemption and should be reviewed carefully with a tax adviser before the fund’s investment mandate is finalised. Getting this list wrong at the mandate-drafting stage is a common source of unexpected tax leakage later in the fund’s life, so it is worth confirming the intended asset allocation against the designated investments definition before, not after, the MAS application is lodged.

Who Section 13O is for

Section 13O suits fund sponsors and families with an initial AUM in the region of S$20 million, as at current MAS guidelines, who are prepared to grow that AUM over time and to employ a small resident investment team in Singapore. It is a natural fit for a newly formed single family office structuring its first Singapore fund, or an independent asset manager launching a boutique fund with family and like-minded investor capital. It is generally not the right scheme for very large institutional-scale funds, which will usually go straight to Section 13U, nor for a family that only wants to hold a single property or operating business without an investment management mandate.

Section 13O also tends to suit families in an earlier stage of consolidating and professionalising their wealth management, where the fund is expected to grow meaningfully over the following years rather than remain static. Because the scheme is explicitly designed as an entry tier feeding into Section 13U, applicants should think of it as the first stage of a multi-year plan rather than a permanent end state. Fund sponsors managing capital from several related family branches, rather than a single household, should also confirm that all investors fall within the definition of qualifying persons for the scheme, since the presence of unrelated third-party capital can affect eligibility and is treated differently to a genuinely single-family structure.

Eligibility and requirements

To qualify for Section 13O of the Income Tax Act 1947, a fund typically needs a minimum AUM of S$20 million at the point of application, which under current MAS guidelines may need to increase to S$50 million within two years of approval. The fund must be managed by a Singapore-based fund manager or family office, which must employ a minimum number of investment professionals resident in Singapore, and the structure must commit to a minimum level of local business spending each year. By comparison, Section 13U of the Income Tax Act 1947 requires a minimum AUM of S$50 million with correspondingly higher staffing and spending expectations, while Section 13D of the Income Tax Act 1947 is generally reserved for offshore funds managed by a Singapore-based manager, with different non-qualifying investor rules.

The whole family office tax incentive landscape was substantively updated with a new class exemption and tiered structure effective from 15 June 2026, replacing the earlier 2023-era graduated AUM ramp-up framework. Applicants and their advisers should always check the prevailing conditions on the MAS fund tax incentive scheme for family offices page, and confirm tax filing treatment with IRAS, since specific thresholds and reporting formats are revised periodically.

Where a Section 13O approval is intended to support a family member’s move to Singapore, the Global Investor Programme (GIP), administered by EDB, offers a Family Office track to permanent residence; see the EDB Global Investor Programme page for current investment and business plan criteria.

Numerical specifics at a glance

• Minimum AUM at application: S$20 million (may rise to S$50 million within two years, as at current MAS guidelines)
• Minimum local investment professionals: typically at least 2, rising with AUM growth
• Minimum annual local business spending: a fixed figure set by MAS, reviewed periodically
• MAS processing time from complete application: typically 4 to 6 months
• Typical professional fees for a Section 13O application (legal, tax, application drafting): commonly S$25,000 to S$60,000
• Annual compliance and filing cost once approved: commonly S$15,000 to S$40,000 depending on fund complexity
• Step-up condition: AUM growth to S$50 million commonly reviewed within a 2-year window post-approval

Cost and timeline across the lifecycle

Pre-application planning, including structuring advice, fund vehicle incorporation (frequently a VCC) and recruitment of local investment professionals, typically takes two to four months before the MAS application is even lodged. The MAS review itself commonly runs four to six months for a complete, well-prepared submission, though incomplete applications or unusual structures can take longer. Once approved, ongoing annual compliance, including audit, tax filing and continued monitoring of AUM, staffing and spending conditions, becomes a recurring cost for the life of the fund. Families should budget for this as an ongoing operating cost, not a one-off project expense; our related guide on the VCC framework’s Section 24 variable capital and share redemption documentation covers a related compliance workstream that Section 13O funds structured as VCCs will also need to manage.

It is useful to separate the cost of the application itself from the cost of running the structure afterwards. The application phase is largely a fixed, one-off cost driven by legal and tax advisory time, MAS liaison, and drafting of the fund’s constitutive and offering documents. The ongoing phase is a recurring cost driven mainly by headcount: salaries for the local investment professionals required under the scheme typically dwarf the audit and filing fees over a multi-year horizon. Families sometimes budget carefully for the former and underestimate the latter, which is why a five-year cost projection, not just a first-year budget, is the more useful planning tool when deciding whether Section 13O makes commercial sense at a given AUM level.

The full lifecycle, step by step

1. Pre-application planning. Confirm AUM, decide on the fund vehicle (commonly a VCC, sometimes a unit trust or limited partnership), and map out the local investment professional hiring plan.
2. Incorporate the fund and the manager entity (if not already existing), and finalise the investment mandate and governance documents.
3. Recruit local investment professionals who meet MAS’s substance expectations for the scheme.
4. Prepare and submit the MAS application, including the AUM declaration, staffing plan, business spending commitment and source-of-wealth documentation.
5. Respond to MAS queries during the review period and finalise any outstanding conditions.
6. Receive approval and commence operating under the scheme’s ongoing conditions.
7. Annual compliance: file the required returns with IRAS and MAS, maintain the minimum AUM, staffing and spending levels, and undergo periodic review.
8. Monitor AUM growth against the step-up condition; funds that grow past the applicable AUM threshold, as at current MAS guidelines, should plan the transition to Section 13U in good time rather than reactively.
9. Transition to Section 13U if AUM growth and strategy warrant it, which involves a fresh application process reflecting the higher AUM, staffing and spending conditions of the enhanced tier scheme.

Decision tree: should you choose Section 13O?

Work through the questions below in order to assess whether Section 13O, rather than Section 13U, Section 13D, or no incentive at all, is the right fit for your fund.

1. Does your fund or family office have at least S$20 million in AUM available at the point of application?
   • No: Section 13O is unlikely to be available yet. Consider building AUM further, or operating without a MAS tax incentive in the interim, taking general tax advice on your position.
   • Yes: proceed to question 2.
2. Is your AUM already at or above S$50 million, with the resources to meet a higher local staffing and spending commitment?
   • Yes: Section 13U may suit you better from the outset, avoiding a later transition. Compare the two schemes carefully with your adviser.
   • No, AUM is between roughly S$20 million and S$50 million: proceed to question 3.
3. Is the fund an onshore Singapore-incorporated vehicle managed by a Singapore-based manager?
   • No, the fund is an offshore vehicle: Section 13D may be more appropriate, subject to its non-qualifying investor rules.
   • Yes: proceed to question 4.
4. Can you commit to hiring the required number of local investment professionals and meeting the annual local business spending condition?
   • No: reconsider timing. It may be more sensible to delay the application until the staffing and spending commitments are achievable.
   • Yes: Section 13O is likely to be a strong fit for your current AUM and structure.
5. Do you expect AUM to grow past S$50 million within the next few years?
   • Yes: plan your Section 13O application with the eventual transition to Section 13U already in mind, so staffing and governance can scale smoothly.
   • No: Section 13O alone should serve your needs for the foreseeable future, subject to periodic review as MAS guidelines evolve.

Common mistakes and gotchas

• Applying before local hiring is realistic. Submitting an application without a credible plan to recruit and retain local investment professionals is a common cause of delay.
• Ignoring the AUM step-up condition. Treating the S$20 million entry threshold as the only figure that matters, rather than planning for the possible increase to S$50 million within two years, as at current MAS guidelines.
• Leaving the 13U transition too late. Funds that grow significantly should start planning the move to Section 13U well before they breach conditions attached to their 13O approval.
• Confusing 13O with 13D. These schemes serve different fund structures (onshore versus offshore); using the wrong scheme reference in an application causes unnecessary back-and-forth with MAS.
• Relying on superseded guidance. The family office tax incentive framework changed materially from 15 June 2026; content or advice still describing the 2023-era ramp-up structure should not be relied upon.

FAQs

What is the minimum AUM for Section 13O?
As at current MAS guidelines, S$20 million at the point of application, with a possible step-up requirement to S$50 million within two years of approval.

How is Section 13O different from Section 13U?
Section 13O of the Income Tax Act 1947 has a lower entry AUM of S$20 million, while Section 13U of the Income Tax Act 1947 requires at least S$50 million and generally imposes higher local staffing and spending conditions.

Can a Section 13O fund later move to Section 13U?
Yes. As AUM grows, many funds transition from Section 13O to Section 13U, which involves a fresh application reflecting the higher tier’s conditions.

Does Section 13O approval help with obtaining Singapore permanent residence?
Not directly, but a well-run Section 13O structure can support an application under the Global Investor Programme’s Family Office track, administered by EDB, for a qualifying principal.

How long does the Section 13O application process take?
Typically four to six months for MAS review of a complete application, on top of two to four months of pre-application structuring and hiring.

Related guides

For hiring plans covering the local investment professionals required under Section 13O and Section 13U, see our guide on family office hiring under 13O, 13U and GIP. If your fund is considering the offshore route instead, see our related FAQ on the Section 13D offshore fund scheme.

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.