A Singapore foreign is a trust where every settlor and beneficiary of the trust are neither citizens nor residents of Singapore or are foreign companies. It is an attractive planning vehicle for the international private client to achieve tax effective wealth preservation, estate planning and succession planning objectives.
A Singapore foreign trust must be administered by a licensed trustee company. Asiaciti Trust Singapore Pte Ltd is a licensed trust company. Trustee companies are licensed and regulated by the Monetary Authority of Singapore.
Section 13G of the Singapore Income Tax Act exempts from tax in Singapore, income prescribed under the Income Tax (Exemption of Income of Foreign Trusts) Regulations 1994. These regulations exempt from tax the specified income from designated investments derived from an eligible holding company or a foreign trust that is administered by a trustee company.
Eligible holding company is a company incorporated outside of Singapore and is formed specifically to hold the assets of the foreign trust.
Specified income includes interest and dividends derived from outside Singapore and received in Singapore from any designated investments. Other types of specified income include interest derived from approved banks and financial institutions, gains and profits from the sale of designated investments, and distributions from foreign unit trusts derived from outside Singapore and received in Singapore. Rents, royalties and premiums arising from property derived outside of Singapore and remitted into Singapore is also considered specified income and hence exempt from taxation in Singapore.
Designated investments includes stocks and other securities of non Singapore companies and financial institutions which are denominated in a currency other than Singapore dollars, deposits with approved banks in Singapore, foreign exchange transactions, Singapore Government securities and real property outside of Singapore.
Important features of Singapore trust law include:
Investment of trust fund
Trustees have a wide discretion in relation to how trust assets may be invested.
Delegation of trustee powers
Trustees have the ability to delegate to an agent.
Perpetuity period
The maximum period during which a trust can continue is 100 years.
Forced heirship
Such laws are not enforceable against a Singapore trust if the settlor had the capacity to transfer the property from the jurisdiction in which the transfer took effect.
Private Trust Companies
Private trust companies (PTC) may be formed in Singapore to act as trustees of Singapore foreign trusts. The PTC can only act as trustee of such a trust if each beneficiary of the trust is a connected person to the settlor of that trust. A "connected person" is essentially a relationship established by blood, marriage or adoption.
A Private Trust Company is exempt from licensing by the Monetary Authority of Singapore (MAS) but must engage the services of a licensed trust company to provide administration services to satisfy the anti-money laundering obligations required by the MAS.
PTC's are increasingly popular for wealthy private clients or those with complex family wealth management structures. The main advantages of a PTC include retention of management control, confidentiality, flexibility and risk limitation in private client wealth and succession planning structuring.
Click below to read more about:
Singapore Tax System
Singapore Company Structures
Limited Liability Partnerships
Anti-Money Laundering Legislation
