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Singapore IFC: a (tax) heaven surrounded by global uncertainty

2 November 2022

Silvia Ricciardi

Low taxes, solid economic stability, freedom of movement, these are only some of the beneficial aspects which are of particular appeal to UHNWIs who decide to relocate to Singapore. Citywealth speaks to its experts to get an overview of what is  also known as ‘Instant Asia’.

Low taxes, solid economic stability, freedom of movement, these are only some of the beneficial aspects which are of particular appeal to UHNW and HNW individuals who decide to relocate to Singapore. Talking about possible disadvantages which comes with choosing Singapore, taking into account the global turmoil generated by both the war in Ukraine and the Covid19 travel restrictions, Citywealth speaks to experts from Singapore and Hong Kong to get an overview of what is also known as ‘Instant Asia’.

 

Moving to Singapore: low taxes and high stability

As an IFC, Singapore looks at attracting the big clients around the world. Looking at the major factors attracting UHNWIs to Singapore, Stephanie Pierce, Managing Associate at Mishcon de Reya (Singapore), who advises on UK tax planning, cross-border succession and wealth structuring for high-net-worth and ultra-high-net-worth international individuals and families, focuses on tax and immigration, mentioning also the importance of a stable government: “Singapore is a global hub and natural ‘gateway to Asia’ for many clients who wish to dip their toe in the Asian markets. It is a lower tax jurisdiction that is friendly to UHNWIs with its attractive tax and immigration regimes for family offices. Singapore also has a robust common law legal system and stable government. English is one of the official languages which makes it easier for international individuals to navigate.”

Comparing the situation before and after the impact of Covid19, Dawn Quek, Head of the Wealth Management practice in Singapore at Baker & McKenzie Wong & Leow, highlights the growing number of single family offices, adding the reasons for this phenomenon: “Singapore is an established global financial centre and has significantly grown the number of single family offices established in Singapore to 400 as at 2020. Prior to the pandemic, UHNWIs in the region were already taking advantage of banking and asset management services in Singapore and setting up single family offices in Singapore to manage their private funds.  Amidst the pandemic and the increasing geopolitical tensions in the past year, many of these UHWNIs have also rushed to obtain a second residence in Singapore, attracted by the safe environment, and high standard of living, including access to quality education and healthcare.”

Clifford Ng, Partner at Zhong Lun Law Firm based in Hong Kong believes that UHNWIs are more inclined to move to Singapore mainly because of low taxes, stability and a path to residence, which is confirmed by Wong Kai Yun, Co-Managing Director at Chia Wong Chambers in Singapore, who insists on the stability and liveability of Singapore, in addition to an attractive geographical position and a friendly tax regime: “Given the uncertain times, and therefore uncertain markets we are in, Singapore provides unparalleled stability and liveability on top of a myriad of opportunities for wealth management. With its ideal geographical location and infrastructure providing a passage for the rest of the world into the Asia-Pacific, Singapore naturally looks appealing to investors worldwide seeking to tap into these fast-growing markets. Its foreign-investor-friendly tax regime, which operates on a territorial basis, is also a welcome bonus.”

 

Global uncertainty: the impact of the Covid19 restrictions

With some markets becoming inaccessible due to strict Covid19 restrictions in place, Singapore easily became a top choice to do business to and from. Main keyword? Freedom. “Places like Hong Kong and Singapore thrive on three things: low taxes, freedom of movement of capital and freedom of movement of people,” explains Clifford. He adds that “the travel restrictions obviously have made it difficult to operate from Hong Kong, especially for people with businesses and family outside of Hong Kong. From the clients’ perspective, Singapore is a good option.”

Talking about Hong Kong, Stephanie states: “We have seen many expat professionals, including private wealth professionals, moving to Singapore from Hong Kong. However, in terms of the UHNWI segment, we have not seen a clear trend.”

“More UHNWIs are indeed moving to Singapore in the face of global uncertainty caused by increased political unrest and rising inflation rates,” highlights Wong Kai Yun, who dwells upon how the restrictions due to the pandemic have had a more incisive impact on the decision to actively consider Singapore compared to the effects of the war in Ukraine, with low income and wealth taxes as the decisive factor. To this regard, Wong Kai Yun strongly thinks that “the knock-on effects of the Russia-Ukraine war play a less significant part compared to the political uncertainties closer to our shores, as well as the inaccessibility of certain markets resulting from territorial Covid-19 restrictions. What also continues to differentiate Singapore’s tax regime from most other wealth management hubs is the comparatively low income and wealth taxes, as well as the absence of gift taxes, estate duty, and capital gains taxes.”

 

The (possible) downsides of choosing Singapore

The world is rapidly changing and so are ultra-high-net-worth priorities. What are the main risks and difficulties UHNWIs encounter at present in Singapore? What are the possible solutions to mitigate them? Stephanie points out that “Singapore is picky as to whom they allow to live in the country and moving to Singapore can be a complex exercise that can sometimes be underestimated. Typically, visa programs depend on being able to significantly contribute to Singapore's economic development and fitting a specific profile, such as having a university education and relevant expertise or special talent. This process can be made easier by appointing competent advisers well versed in the intricacies of the Singapore immigration, tax and family office regimes.”

“While I said stability is a pull factor for Singapore, it is a small economy and there is a fine balance in attracting foreign capital and talent and overheating in the local market and, in particular, housing,” stresses Clifford Ng, who adds that “clients need to be aware of changes in policies that may change their calculus in being in Singapore.”

 

New trends in Singapore? Our experts think that…

apart from immigration, in recent years, we have seen many UHNW and family office engage more actively in philanthropy and we are working with many families on establishing charities, foundations and other philanthropic vehicles to further their philanthropic objectives.

Dawn Quek, Baker & McKenzie Wong & Leow

the family office regime continues to be very attractive to international UHNW families. We are seeing more interest from established family offices from further afield who wish to set up an Asian base in Singapore.

Stephanie Pierce, Mishcon de Reya

having been knee-deep in wealth structuring for various purposes, from inter-generational succession planning to division of assets post-divorce, I have witnessed the increasing significance of nuptial agreements, both locally and internationally. With the formalities and requirements that nuptial agreements must comply with varying from jurisdiction to jurisdiction, professionals must be adept at navigating these to ensure that the nuptial agreements we draft serve their purpose and are enforceable not only by the Singapore courts, but also worldwide.

Wong Kai Yun, Chia Wong Chambers

the attraction to places like Singapore is the freedom of movement of both people and capital. Uncertainty in the markets is relative, but if there is too much uncertainty, people and capital can move out quick (and could eventually move some where else, hello, Hong Kong!)

Clifford Ng, Zhong Lun Law Firm

 

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