SINGAPORE AS A CENTRE FOR WEALTH MANAGEMENT
In line with the Singapore Government’s aim to promote Singapore as a centre for international wealth management and offshore trusts, our laws and regulations relating to the set up, administration and management of trusts have been re-organized. In addition, certain generous income tax exemptions relating to foreign and local trusts have been put in place to encourage the establishment of trusts and the administration and management of trust activities.
FOREIGN TRUST
As of 17 February 2006, a trust will be regarded as a foreign trust if it is a trust in writing and every settlor and beneficiary are:-
· Individuals who are neither citizens of Singapore nor resident in Singapore;
· Foreign companies;
· Trustees of other foreign trusts falling under Section 13G of the Income Tax Act;
· Foreign accounts of philanthropic purpose trusts, or
· Persons neither resident in Singapore nor constituted or registered under written laws in Singapore.
TAX CONCESSIONS OF FOREIGN TRUSTS
To qualify for tax exemptions on specified income of designated investments, and dividends paid/payable by an eligible holding company to a foreign trust, the foreign trust must be administered by a Singapore trust company. Such a company must be licensed under the Trust Companies Act 2005 or exempted from the requirement to hold a trust business license for carrying on trust business in Singapore under that Act.
Under the Income Tax (Exemption of Income of Foreign Trusts) Regulations, income derived by a foreign trust administered by a trust company in Singapore which will be exempted from tax, includes income from the following sources:-
· Interests and dividends derived from outside Singapore and received in Singapore in respect of any designated investments.
· Rents, royalties, premiums and any other profits arising from property derived from outside Singapore and received in Singapore.
· Gains or profits derived from sale of any designated investments.
· Distributions from foreign unit trusts derived from outside Singapore and received in Singapore.
DESIGNATED INVESTMENTS
Designated investments include the following:-
· Stocks and shares denominated in any foreign currency of companies which are neither incorporated in Singapore nor resident in Singapore [excluding stocks and shares of companies incorporated in Malaysia which are listed on the Singapore Exchange or the Kuala Lumpur Stock Exchange (KLSE)];
· Securities (other than stocks and shares) denominated in any foreign currency issued by foreign governments, foreign banks outside Singapore and companies which are neither incorporated in Singapore nor resident in Singapore;
· Any immovable property situated outside Singapore;
· Foreign currency deposits with financial institutions outside Singapore;
· Stocks, shares, bonds and other securities listed on the Singapore Exchange or on the KLSE, or issued by companies incorporated in Singapore and resident in Singapore;
· Singapore government securities;
· Foreign exchange transactions;
· Units in any unit trust which invests wholly in designated investments.
DURATION OF THE TRUST
Under the Trustees Act Cap. 337 and the Civil Law Act Cap 43, the validity of a trust extends to 100 years unless a shorter period is specified in the trust. The income of the trust may also be accumulated for the period of the trust. In addition, there is a “wait and see” provision which treats a non-vested interest as valid if such an interest eventually vests within the validity period.
ADMINISTRATION AND MANAGEMENT OF TRUSTS
To be eligible for the abovementioned tax exemptions, a foreign trust will have to be administered and managed by a Singapore Trust Company with a valid trust business license or exempted from holding one under the Trust Companies Act 2005. All companies carrying on trust businesses are thus subject to the supervisory jurisdiction of the Monetary Authority of Singapore under the relevant Singapore statutes and regulations.
POWER OF TRUSTEES
The Trustees Act Cap. 337 regulates the exercise of powers of trustees. Trustees who manage a trust have general powers of investment of the assets in the trust. A trustee is under a statutory duty to exercise such care and skill as is reasonable in the circumstances, having regard to any special knowledge or experience which may be reasonably expected of a person acting in the course of the kind of business or profession he is in.
The trustees have to observe the standard investment criteria in that Act which means that in making investment decisions the following must be considered:-
· Whether the form of investments is suitable for the trust, and;
· Whether there is need of diversification of investments in the trust.
A trustee may delegate all or part of his functions by a power of attorney, but he shall remain liable for the acts or defaults of the donee. He may appoint agents for all functions except that relating to the distribution of the assets, whether capital or income, or to appoint a trustee, a nominee or a custodian.
PROTECTION UNDER SINGAPORE LAWS
Foreign and local trusts in Singapore enjoy strong protection under laws and regulations which are supervised by the Monetary Authority of Singapore (“MAS”) which maintain high standards by way of:-
· Compulsory licensing and supervision of trust companies;
· Setting regulatory standards for the professional conduct and management of trust business activities; and
· Maintenance of anti-money-laundering measures.
VALIDITY OF THE TRUST
Under the Trustees Act Cap 337, a foreign trust set up in Singapore may also enjoy protection and validity against claims of certain persons who may otherwise be entitled under inheritance or succession rules in the country where the settlor resides.
STRUCTURE OF A TRUST IN SINGAPORE
