Setting up Family Offices in Singapore and Switzerland – Could a hybrid Singapore-Switzerland Family Office structure be the way to go?

In the world of wealth management, family offices play an important role in protecting and increasing the assets of high-net-worth families. A family office may serve either one family or multiple families, hence there are both Single-Family Offices (SFOs) and Multiple-Family Offices (MFOs). A family office administers and manages the financial and other affairs of its clients, such as tax planning, estate planning, fund management, and philanthropy.

Singapore and Switzerland are prominent global financial centres that have distinct benefits for the establishment of family offices due to their stable economic environments, favourable regulatory frameworks, and robust financial services sectors. Despite the unique characteristics of each nation, a strategic decision between them or a combined approach including both can provide extensive advantages catered to a range of financial objectives. This brings us to the aim of this article which is to provide a comparative and integrative guide on setting up family offices in these two jurisdictions, tailored for high-net-worth families and their advisors.

Features of Family Offices in Singapore

Singapore’s strong financial system, stable political environment, and advantageous location in Asia make it a top choice for family offices. Some salient characteristics are as follows:

Singapore’s efficient and transparent regulatory framework is ideal for family offices. The industry is regulated by the Monetary Authority of Singapore (MAS), which also maintains a high standard of operational openness.
Singapore’s family offices have a tax environment that is advantageous to them, with a low personal income tax rate, which is progressive with a maximum of 20% for tax residents, and a number of benefits for fund management activities. Its appeal is further increased by the fact that there is no estate duty or capital gains tax.
With access to premier banking, legal, and investment professionals, the city-state has a well-established financial services industry. This knowledge is essential for growing and managing family wealth.
Singapore’s political stability and safety are well-known, offering a safe haven for managing and preserving capital.

Benefits of Setting Up a Family Office in Singapore

Family offices in Singapore can greatly improve financial efficiency and lower tax loads by taking advantage of the Global Investor Program, which accords Singapore Permanent Resident status to eligible investors, and tax exemptions, such as those under Section 13O and 13U of the Singapore Income Tax Act 1947 (“ITA”). Under Section 13O of the ITA, subject to the fulfilment of specified criteria, the income of a company incorporated and resident in Singapore that arises from funds managed by a fund manager in Singapore may be exempt from income tax. Under Section 13U of the ITA, subject to the fulfilment of specified criteria, income arising from funds managed by a fund manager in Singapore may be exempt from income tax.
Singapore’s advantageous location allows it to be a gateway to the vibrant markets of Asia. Family offices can take use of this position to invest in and profit from new ventures in the region.
Singapore’s cutting-edge infrastructure facilitates a broad variety of financial services, including estate planning and asset management, guaranteeing family offices have access to extensive and cutting-edge resources.
Additionally, Singapore has outstanding standards for healthcare, education, and general living conditions, making it an appealing option for families thinking about migrating.

General Steps for Setting Up a Family Office in Singapore

Singapore has emerged as a premier location for family offices and with an increase in the number of high-net-worth families, Singapore offers a stable and prosperous environment for managing and growing wealth. Here’s a streamlined guide to the legal steps of establishing a family office in Singapore, which our lawyers will guide you through in detail:

Determine the Structure: Usually, the wealth managed by a family office is in a fund that is structured as a separate entity, and which enters into an Investment Management Agreement with the family office entity. For the SFO, both the fund entity and the family office entity would typically be wholly owned by a holding company which is in turn owned by members of the same family through a trust or otherwise. The fund entity in a family office structure may take the form of various legal structures. One new legal structure which has been designed for investment funds is the variable capital company (VCC). A VCC’s capital will always be equal to its net assets, and its structure makes it conducive for investors to be issued shares and to redeem shares. Unlike a Singapore private limited company which is only able to pay dividends out of its profits, a VCC can pay dividends out of its capital. Furthermore, a VCC can be set up as a single fund or as an umbrella fund with multiple sub-funds, enabling the VCC to hold multiple portfolios of segregated assets and liabilities in a cost-efficient manner. Additionally, a VCC’s register of shareholders is not required to be made public, thereby giving more privacy to investors.
Setting up the Structure: Set up the family office entity and fund entity by registering with the Accounting and Corporate Regulatory Authority (ACRA). Like a regular Singapore private company limited by shares, a VCC would require the appointment of directors and a company secretary, as well as the registration of its office address and Constitution. Additionally, a VCC is required to appoint a Permissible Fund Manager which must be a licensed fund management company, a registered fund management company, a bank licensed under the Banking Act 1970, a merchant bank approved under the MAS Act 1970, a finance company licensed under the Finance Companies Act 1967, or a company or co-operative society licensed under the Insurance Act 1966. If the family office does not hold a requisite licence, it would have to engage one of the abovementioned entities for the management of the fund.
Legal and Regulatory Compliance: Ensure compliance with MAS regulations, including any necessary licences if the family office will engage in fund management activities. While a fund manager is generally required to obtain a capital markets services licence under the Securities and Futures Act 2001, a SFO which manages funds is generally able to fall within an exemption to the licensing requirement if it is structured in a particular way whereby its management of funds is carried out for a related corporation, or if it has obtained the approval of the Monetary Authority of Singapore (MAS) for an exemption on a case-by-case basis. Currently, the MAS is looking to implement a class exemption for SFOs that will be broader and remove the need for the case-by-case exemption.
Legal Documentation: Robust legal documentation is required in the process of employing the staff of the family office and engaging service providers. Important legal documentation includes the Investment Management Agreement, Trust Deed, Outsourcing Agreements, Employment Agreements, Service Agreements, Company Constitution, Offering Memorandum, Subscription Agreement, Fund Administration Agreement and Custodian Agreement.
Apply for tax exemptions: One advantage of setting up an SFO in Singapore is the tax exemptions that are available to it. Under Section 13O of the Income Tax Act 1947, subject to the fulfilment of specified criteria, the income of a company incorporated and resident in Singapore that arises from funds managed by a fund manager in Singapore may be exempt from income tax. Under Section 13U of the Income Tax Act 1947, subject to the fulfilment of specified criteria, income arising from funds managed by a fund manager in Singapore may be exempt from income tax.
Ongoing Compliance and Reporting: Regularly review and comply with local regulations, including reporting requirements to MAS and tax authorities.

Features of Family Offices in Switzerland

Switzerland is a particularly appealing destination for family offices, drawing business from all over the world. The appeal of the nation is found in its:

Regulatory Environment: SFOs are not subject to authorisation under the Financial Institutions Act (FinIA) if one of the managers and/or administrators (i.e. individuals) of the assets has one of the following family ties (non-exhaustive list below, complete list in art. 4 para. 1 of the Financial Institution Ordinance) with the persons whose assets are being administrated:
- relatives by blood or by marriage in the direct line;
- relatives by blood or by marriage up to the fourth degree in the collateral line;
- spouses and registered partners;
- persons living in a permanent life partnership with a portfolio manager or trustee.

MFOs are subject to authorisation under the FinIA as portfolio manager under art. 2 para.1 let. a FinIA. Such type of authorization is common in Switzerland and may allow to manage structures (SPV) dedicated to the families as well as other structures (such as structured products / actively managed certificates), not necessarily dedicated to the relevant families.

Privacy and Confidentiality: Families looking for privacy in wealth management find that the strict data protection rules and banking secrecy laws in Switzerland provide a high degree of privacy. Regulated entities are also subject to data securities strict requirements.
Tax System: Switzerland has an attractive tax system, and at the cantonal level, advantageous tax agreements can be negotiated with some canton. Family offices can efficiently optimise their tax status thanks to this flexibility.
Wealth Management Experience: Switzerland is home to many different private banks and wealth managers that are well-known for their vast portfolio management expertise with high-net-worth individuals. Despite that, Switzerland is a leading global financial centre, known for its strong banking sector and exceptional privacy standards. Swiss banks have a long history of expertise in managing international currencies and capital markets, offering dedicated services for various jurisdictions. The low financial risk and high privacy associated with Swiss bank accounts are significant benefits for family offices. Most of the financial products and instruments are available in or from Switzerland, due to the very liberal approach of the Swiss regulation towards sophisticated & professional clients (such as high-net worth individuals).

Benefits of Setting Up a Family Office in Switzerland

Privacy and Confidentiality: Switzerland’s strict data protection laws and banking secrecy rules provide family offices with unmatched privacy by guaranteeing that sensitive financial information is safely safeguarded.
Political and Economic Stability: The nation’s strong economy and stable political climate offer a solid basis for asset management, reducing exposure to geopolitical risks.
Advanced Financial Services: With a long history of distinction and professionalism, Switzerland’s financial industry provides a wide range of specialised banking and investing services catered to the demands of high-net-worth clients.
Customised Tax Solutions: Due to Switzerland’s adaptable tax laws, family offices may be able to negotiate very advantageous tax rates with individual cantons.

General Steps for Setting Up a Family Office in Switzerland

Choose the Legal Structure: In most cases, the legal structures chosen by family offices is a company limited by shares (Société anonyme) under art. 620 ss of the Swiss Code of Obligations or a Swiss family foundation under the Swiss Civil Code. For tax reasons, a holding company may be added in case a share corporation has been selected, or another appropriate entity. Each structure offers different benefits and regulatory requirements. In case the purpose of the family office is managing diversified investments, financial assets, or commercial activities and is to administer financial instruments, real estate or liquidities, the Société anonyme is more commonly use. On the other hand, a family foundation is better suited for long-term wealth preservation, especially when the focus is on non-commercial assets like real estate, art, or philanthropy. Although a foundation provides strong protection for family wealth as long-term preservation of assets, making it ideal for intergenerational wealth transfer, unlike a Société anonyme, a foundation cannot distribute profits. Its focus is on asset preservation and administration. Once established, a foundation’s purpose is difficult to change, which may pose challenges if family objectives evolve over time. Foundations are also subject to supervision by the cantonal authorities to ensure that the foundation is operating according to its charter, which imposes additional administrative oversight.

Develop Your Business Model: To help you visualise and define the essential elements of your family office, create a business model canvas. You can use this tool to create your service offerings, operational framework, and client interaction plans.
Create Your Legal Structure: Decide whether to establish your family office under a share corporation or foundation as the legal structure. Make sure your structure conforms to all applicable laws, rules pertaining to data protection and anti-money laundering, and any requirements set forth by professional associations.
Register the Entity: Register the family office with the commercial register and ensure compliance with FINMA regulations. Depending on the activities (typically MFO), you may need specific licenses.
Engage Local Experts: Consult with Swiss legal, tax, and financial advisors to navigate local regulations, optimize tax positions, and set up the legal framework.
Set Up Operations: Establish the office’s operational setup, including hiring staff, setting up banking arrangements, and implementing financial management systems.
Compliance and Reporting: Regularly review compliance with Swiss regulations, including financial reporting and tax obligations.

Singapore and Switzerland both offer compelling reasons to establish a family office, with each focussing on various elements of asset management and preservation. Singapore is a great option for families wishing to access Asian markets and take advantage of contemporary financial services because of its advantageous tax structure, strategic location within Asia, and strong infrastructure. On the other hand, Switzerland offers an advanced and safe environment for wealth management due to its unmatched privacy, political neutrality, and professional financial services.

Could a hybrid Singapore-Switzerland Family Office model work?

A hybrid approach can be quite beneficial for high-net-worth families looking for a combination of benefits from both regions. The best of both worlds can be achieved by establishing a family office in Singapore which conducts some of its business or makes some of its investments in Switzerland, or vice versa.

Moreover, with more SFOs looking to outsource various functions to external experts due to a lack of internal expertise, such functions may also be provided across jurisdictions, with Singapore family offices engaging Swiss expert professionals to manage their Swiss businesses and investments, and vice versa. Accessing a broader talent pool would remove barriers to family offices’ efforts in diversifying their businesses and investments. Our lawyers will be able to draft the required cross-border contracts that take into consideration the relevant aspects of Singapore and Swiss law, so as to achieve the desired structure for your family office’s operations while safeguarding the family office’s interests.

With the help of this multi-jurisdiction strategy, families may take advantage of Switzerland’s security and privacy as well as Singapore’s growth potential to create a comprehensive wealth management solution that meets the local and international objectives of family offices.

For more information about family offices in Singapore, please contact Kenneth Pereire and/or Lin Yingxin by email at kenneth@kgplegal.com.sg and yingxin@kgplegal.com.sg respectively.

For more information about family offices in Switzerland, please contact Fabien Gillioz at fgillioz@oalegal.ch and/or Alexandre de Boccard at adeboccard@oalegal.ch and/or Marc-Anthony de Boccard at mdeboccard@oalegal.ch respectively.