29 Asian Legal Business | October 2024 Due to the increased scrutiny on new applications, “Our understanding is that the MAS was processing a huge backlog of applications in 2022 and 2023, which resulted in a lengthy and uncertain wait time for applications which were pending approval,” say Ara and Sim. The popularity of the tax incentive schemes also played a role. Despite holding the crown as Asia’s premier family office hub in recent years, the evolving regulatory approach is bringing Singapore new challenges in its competitiveness in attracting more ultra-wealthy individuals overseas. “One key challenge faced by Singapore is in facilitating the ease of doing business and investing in Singapore, while still having robust controls to deter criminals and detect illicit activities so as to ensure that the broader financial industry remains clean, credible and reputable,” say Ara and Sim. Another major challenge is that the Singapore authorities will need to continue to encourage wealthy international individuals and families to set up or invest in family offices in Singapore, and the current family offices to grow and expand their operations. But at the same time, the government will also be tasked with making sure that these initiatives could bring actual economic benefits to Singapore and minimise any negative socio-economic effects on Singapore citizens. As such, some lawyers believe some families may have chosen Hong Kong as the location for their new family office due to the relatively lower barrier to entry and greater ease and speed of set-up. Coming from behind Buoyed by robust policy support and a strong wealth management sector, Hong Kong is now home to more than 2,700 single-family offices in the city, according to a Deloitte study published in collaboration with FamilyOfficeHK in March this year. Deirdre Fu, partner at Withers in Hong Kong, has seen on the ground a steady growth of family offices in Hong Kong in the wake of Singapore’s turn to discretion. “The Hong Kong government has provided incentives to attract family offices to be established or to continue their operation in the city, and has indicated its intention to introduce further incentives, including additional tax incentives for a wider range of family investments (including art, crypto, interest-bearing investments), and possibly tying the CIES immigration scheme with the family offices tax concession scheme,” notes Fu. By origin, Hong Kong has been favoured by ultrarich families both from mainland China and Hong Kong as a place to store their assets, partly due to the territory’s flexible tax concession scheme. “The setting up of a family office in Hong Kong such that the family investments it manages could take advantage of the tax concession in Hong Kong does not require pre-approval, whereas there are pre-approval requirements in Singapore that can take more than a year,” says Fu. Ara and Sim also concur that Hong Kong’s tax concession arrangements are comparatively easier and quicker for a family office to obtain. But they believe Singapore and Hong Kong, both attractive jurisdictions to ultra-wealthy individuals, are fundamentally at different stages in building up the family offices ecosystem. “Hong Kong is at a much earlier stage in attracting family offices, having only introduced their tax concession for family investment holding vehicles in May 2023,” say Ara and Sim. “With all factors equal, a client looking to set up a family office and obtain a tax incentive easily and quickly, would find Hong Kong more attractive.” Zhong Lun’s Ng is optimistic about the growth of family offices in jurisdictions touted as Asia’s premier asset management hubs. “In a geopolitically charged world, both are open, stable and low-tax economies with strong financial and professional infrastructures essential for family offices,” says Ng. “If you are a manufacturer and you need plants in different places in Asia, Europe and North America, your family office may also need to be geographically diversified,” he adds. Family Office “The Hong Kong government has provided incentives to attract family offices to be established or to continue their operation in the city, and has indicated its intention to introduce further incentives, including additional tax incentives for a wider range of family investments, and possibly tying the CIES immigration scheme with the family offices tax concession scheme.” — Deirdre Fu, Withers
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