What’s the Singapore Qualifying Foreign Trusts (QFTs) All About?

A Guide to Singapore Qualifying Foreign Trusts (QFTs)There are many benefits of setting up a trust in Singapore. First, the process is straightforward, and there isn’t much bureaucracy. Furthermore, managing the trust is easy, even for those who want to change their citizenship, domicile, or people with families abroad. The easy estate transitions and absence of lengthy procedures are also highly favourable.

And an interesting part? Well, foreigners are also allowed to set up a trust in Singapore through Singapore Qualifying Foreign Trusts (QFTs).

 

A High Networth Individuals’ First Choice

The socio-economic conditions of Singapore offer an ideal environment for High Networth Individuals (HWIs) to set up trusts. Here are some reasons why HWIs love Singapore for setting up their trust accounts:

  • Political stability and supportive government table political system and government
  • A robust legal system
  • Competitive tax regime
  • Progressive financial regulatory framework
  • Well-respected wealth management and trust jurisdiction is well-respected

 

Qualifying Foreign Trusts in Singapore

Singapore trusts abide by the English trust law principles. Therefore, anyone who sets up a trust in Singapore will predominantly have their trust regulated by the Trustees Act. The act is regularly updated to keep up with the ever-changing needs of the trust sector. With such regulations in place, trustees are expected to abide by certain minimum standards. This comes into effect when a trustee wishes to exercise their powers.

The Trust Act acts as a framework that clearly identifies a trustee’s duty of care. Do trusts get taxed? Yes, but it will depend on the residency of the faith in question. For example, trusts with Singapore residency and no exemption will have their income taxed. The tax will be either at the trustee level or the beneficiaries.

In the case of Singapore QFTs, they may be exempted from getting taxed in Singapore for certain “specified income”. Examples of this type of income include rents, premiums, and royalties from external sources (outside Singapore). It also includes interests and dividends from external investments (outside Singapore). Any gains, profits, and distribution from investments and trusts outside of Singapore also count.

All of the above only applies if the beneficiary or the settlor of the trust is not a Singapore resident, citizen, or Singapore company. In this case, the trust should be administered by a licensed Singapore trust company.

 

Other Tax Exemptions

Tax exemptions also apply where beneficiaries qualify as an “eligible holding company”. This means the company has been incorporated outside Singapore and is wholly owned by the trustee. The company should also have been formed for the specific purpose of holding QFT assets.

 

Why Investors Choose QFTs in Singapore

QFTs in Singapore are desirable because of the level of confidentiality that comes with it. QFT holders don’t need to reveal the identities of the beneficiaries or settlers, and they have no registration requirement. Private trust companies are also available for investors who want them.

Per Singapore law, all trusts are valid for 100 years unless a shorter period has been specified in the deed. QFTs keep going even when the settlor or beneficiary becomes a Singapore resident or citizen (subject to certain conditions).

With an extensive double tax treaty network with more than 70 countries globally, Singapore QFTs are gaining substantial interests. The 2005 Trust Companies Act (TCA) oversees the governance of the trust business in Singapore. Strict confidentiality provisions are enforced by the Monetary Authority of Singapore (MAS) and the TCA.

Families prefer private trust companies because the company acts as the trustee. Thus, this ensures the families have greater control over the assets. Greater privacy is available too where such trusts are concerned. The trust structure’s validity is neither compromised nor its residency (tax purposes). That is why private trust companies have the advantage of long-term and immediate tax planning.

Although private trust companies are exempted from licensing by MAS, a licensed trust company must be appointed. The company will administer MAS’ anti-money laundering obligations. With its business-friendly and progressive approach, Singapore remains the top choice for the wealthy who want to set up a trust for their families.

A Guide to Singapore Qualifying Foreign Trusts (QFTs)