Singapore to cut fund management taxes to retain talent

The Monetary Authority of Singapore plans to exempt profits tied to fund management from tax, establish a capital programme to invest in hedge funds based in Singapore and relax visa requirements for senior fund managers. Officials expect more detail in next year’s national budget.

The proposed tax exemption may cover a wider group of investment professionals than recent proposals in Hong Kong aimed at carried interest. The MAS has not disclosed the size of the hedge-fund capital programme or the full fiscal cost and scope of the tax changes.

Hong Kong has proposed allowing asset managers to receive carried interest without paying tax. That policy has prompted some hedge fund and private equity teams to consider moving senior staff, and industry groups in Singapore had urged regulators to outline incentives to keep managers in the city-state.

Singapore’s fund management industry manages almost S$7 trillion (about $5.5 trillion) in assets. Assets under management have grown at an average annual rate of 7.5% over the past five years. Fund management accounts for about 15% of the financial services sector’s output and about 13% of employment in finance.

Authorities point to Singapore’s ability to access artificial intelligence models developed in both China and the United States as a technical advantage for local managers building trading and research tools. Some US-developed models are restricted in Hong Kong.

No firm implementation timeline has been given beyond the budget. Market observers will watch the eligibility rules for the tax exemption, the scale of the hedge-fund capital programme and the expected budgetary impact when authorities publish further details.