Singapore: Budget 2018 highlights for the fund management sector

• Tax transparency treatment will be accorded to ETFs which invest into S-REITs (S-REIT-ETFs), so as to provide parity with the tax treatment for investment in individual S-REITs.
• With this initiative, distributions made by S-REITs to S-REIT-ETFs will not be subject to tax at the prevailing corporate tax rate of 17% in the hands of S-REIT-ETFs. This will eliminate tax leakage and individual investors will not be worse off by investing in S-REIT-ETFs.
• This change will take effect on or after 01 July 2018, with a review date of 31 March 2019. Further details will be released by the Monetary Authority of Singapore (MAS) and the Inland Revenue Authority of Singapore by March 2018.

• The FSI scheme presently accords a concessionary tax rate of 10% for income on fund management services.
• The scheme will be extended till 31 December 2023.

• A tax framework for S-VACCs will be introduced to complement the S-VACC regulatory framework. The MAS will release further details by October 2018.
• Under the proposed tax framework:
  • an S-VACC will be treated as a company and a single entity for tax purposes
  • the tax exemptions available under sections 13R and 13X of the Income Tax Act, Chapter 134 of Singapore (ITA) will be extended to S-VACCs
  • the Financial Sector Incentive – Fund Management scheme which provides for a concessionary tax rate of 10% of income derived from managing an incentivised fund will be extended to approved fund managers managing an incentivised S-VACC, and
  • existing GST remission for funds will be extended to incentivised S-VACCs.
• These changes will take effect on or after the effective date of the implementation of the S-VACC regulatory framework.

Please refer to our earlier article on the ‎S-VACC framework here.

• This scheme is presently available for companies, trusts and limited partnerships, subject to qualifying conditions.
• The Enhanced-Tier Scheme will be extended to all fund vehicles constituted in all forms provided that the qualifying conditions are met.
• This change will take effect for new awards approved on or after 20 February 2018.
• The MAS will release further details by May 2018.