I get asked about 13O vs 13U more than almost any other Singapore fund question. The short version: both schemes exempt specified income from designated investments from Singapore's 17% corporate income tax. The long version is where it gets interesting, because the schemes differ in fund size thresholds, domiciliation rules, staffing requirements, and local spending obligations. And the January 2025 amendments changed several of these in ways that catch people off guard [1].
Most managers I work with at Allocator One Asia have a general sense that 13O is for smaller funds and 13U is for larger ones. That is correct but incomplete. The real decision is about where you are now, where you expect to be in five years, and how much operational substance you are prepared to maintain in Singapore on an ongoing basis.
What both schemes actually do
Section 13O (the Onshore Fund Tax Incentive Scheme) and Section 13U (the Enhanced-Tier Fund Tax Incentive Scheme) both provide tax exemption on specified income derived from designated investments. That includes dividends, interest, and capital gains. Qualifying funds also get withholding tax exemption on distributions to non-resident investors and GST remission on prescribed expenses [2]. The exemption lasts for the life of the fund, provided you meet the qualifying conditions every single year. Miss a year and you lose the exemption for that year, even if you qualify again the next one [3].
The designated investments list is broad. It covers listed equities, REITs, ETFs, qualifying debt securities, derivatives, collective investment schemes, and equity interests in unlisted companies meeting certain conditions. Since the October 2024 MAS circular, real estate investment funds in any legal form also qualify, and so do carbon credits [4].
The size thresholds
This is where the two schemes diverge most obviously. Section 13O requires a minimum of S$5 million in designated investments for existing non-SFO funds, or S$20 million for new single-family office funds. Section 13U requires S$50 million [3].
Here is the part that changed in January 2025: both thresholds are now ongoing maintenance requirements, not just application-time checks. Before 2025, a 13U fund only needed S$50 million at the point of application. Now you need to hold S$50 million in designated investments as of the end of every financial year [3]. For 13O, the S$5 million annual minimum is entirely new. If your AUM dips below the threshold because of a bad year or a redemption, you lose the exemption for that year.
One useful clarification: AUM is now measured by the value of designated investments specifically, not net asset value. And loans used to finance those investments do not get deducted. This matters for leveraged strategies [4].
Fund structure and domicile
Section 13O only works for Singapore-incorporated entities: companies, VCCs, or (since January 2025) limited partnerships registered under the Limited Partnerships Act through the new Section 13OA framework [3][4]. The fund must be tax-resident in Singapore, meaning central management and control is exercised here.
Section 13U is more flexible. It covers both Singapore-incorporated and offshore fund vehicles. If your fund is domiciled in the Cayman Islands or BVI and you want Singapore tax benefits, 13U is your only option [3]. For master-feeder structures, 13U now allows you to meet AUM and spending requirements collectively at the master level rather than entity by entity, which simplifies compliance for complex architectures [3].
This structural difference alone determines the answer for some managers. If you have an existing offshore vehicle and do not want to restructure, 13U is the only path.
Staffing requirements
Section 13O requires a Singapore-based fund management company employing at least two full-time investment professionals. They must be portfolio managers, research analysts, or traders, earning more than S$3,500 per month and tax-resident in Singapore. For SFO-managed funds, at least one must be a non-family member [2][5].
Section 13U raises this to three investment professionals, with the same salary and residency rules. For SFO funds, at least one of the three must be a non-family member [2].
The difference between two and three professionals sounds small. In practice it affects your cost base meaningfully, especially for a first fund managing S$50-80 million where every dollar of overhead matters.
Local business spending
The January 2025 amendments replaced the old flat S$200,000 requirement with a tiered system that scales with AUM [3][6]:
- Below S$250 million AUM: S$200,000 per year.
- S$250 million to S$2 billion: S$300,000 per year.
- Above S$2 billion: S$500,000 per year.
These tiers apply to both 13O and 13U. Qualifying spending includes Singapore employee salaries and CPF contributions, office rent, fees to Singapore-based lawyers, auditors, tax advisors, fund administrators, and even qualifying charitable donations [2]. The tiered approach is a genuine improvement over the old flat number, which hit smaller funds disproportionately hard.
New 13U funds must meet these from year one. Existing 13U funds have a grace period through the financial year ending in 2027 [3].
Local investment requirements
Both schemes require you to invest the lower of 10% of AUM or S$10 million in prescribed local investments at any point during the incentive period [5]. That means Singapore-listed equities, REITs, SGX-traded ETFs, qualifying debt from Singapore entities, or private funds distributed through Singapore-licensed managers. Climate-related investments and blended finance structures with Singapore financial institution involvement also qualify, sometimes at 1.5x or 2x multipliers [5].
You get a one-year grace period after approval to meet this requirement. For most VC or PE managers whose strategy is not Singapore-focused, this is the requirement that takes the most deliberate planning. You need to identify suitable local investments that do not distort your portfolio construction.
How to decide
I advise managers to think about this in terms of three questions:
What is your realistic AUM over the next three to five years? If you expect to stay below S$50 million, 13O is the obvious choice. If you are already above S$50 million or confident you will get there quickly, 13U gives you structural flexibility that 13O cannot. If you are in between, start with 13O and plan a transition.
Where is your fund domiciled? Offshore vehicle means 13U. Singapore-incorporated company or VCC means either scheme is available. LP structure means 13OA (the new limited partnership variant of 13O) or 13U.
How complex is your fund architecture? Master-feeder structures, multi-currency vehicles, and SPV arrangements work better under 13U because of the collective compliance calculation at master level. Simpler single-vehicle structures work fine under 13O.
The transition from 13O to 13U is possible. You submit a new application to MAS demonstrating you meet the enhanced requirements. But plan proactively. You do not want a gap where you have outgrown 13O but have not yet qualified for 13U [1].
The application process
Both schemes require formal application to MAS. Section 13D (the offshore fund exemption) is self-administered, but 13O and 13U are not [2]. Expect to submit investment strategy documentation, staffing details, projected spending budgets, AUM projections, AML/CTF policies, and beneficial ownership information. Since October 2024, a mandatory screening report is also required [2].
Straightforward applications take three to six months. Complex structures can take up to twelve [7]. Once approved, you claim the exemption annually through your IRAS corporate tax return, with supporting documentation proving you met every condition during that year [7]. This is not a file-and-forget regime. The annual compliance burden is real.
How we help at Infra One
At Allocator One Asia and Infra One, we work with fund managers through the full process of choosing between 13O and 13U, preparing applications, and maintaining ongoing compliance. Our fund administration platform handles AUM monitoring, investor onboarding with automated KYC/AML, capital calls, NAV calculations, and the regulatory reporting that keeps your exemption intact year after year.
The most expensive mistake I see is managers picking the wrong scheme at launch and having to restructure two years later. The second most expensive is underestimating the annual compliance work. We help with both. If you are planning a fund in Singapore and want to talk through the 13O vs 13U decision, get in touch.
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