Singapore has enacted comprehensive secrecy and confidentiality provision to the Banking Act, Chapter 19 of Singapore (“Banking Act”) and the Trust Companies Act to offer protection to the personal information of banking clients and settlors and beneficiaries of trusts. These secrecy laws are subject to Singapore’s commitment to assist the international community in combating against money laundering, terrorism financing and tax evasion.

Singapore’s greatest competitive advantage is the openness of its economy. It has been regularly rated as one of the world’s freest economy, and easiest jurisdiction to carry on business by the World Bank. There is no exchange control, and the exchange rate of the Singapore dollar is managed by MAS (Monetary Authority of Singapore), against a basket of currencies of its main trading partners, with the objective of keeping inflation low and maintaining the purchasing power of the Singapore dollar. Global financial institutions (including private bankers) and fund managers are attracted to Singapore.

The conduct of trust business, and the licensing and regulation of trust companies, are controlled by the Monetary Authority of Singapore (MAS) and are subjected to strict anti-money laundering requirements. MAS grants licenses only to those trust companies that meet their high standards in terms of quality, financial reporting, operational controls, and the experience and integrity of the professionals that are employed to manage the business. MAS supervises trust companies by conducting off-site reviews and on-site inspections.

The territorial principle of tax applied to the income of a trust; accordingly, tax will charged on income that is earned or received in Singapore. Such income is the statutory income of the trustee and is chargeable to tax at the trustee level; therefore, when distributed, this income is not subjected to further tax in the hands of the beneficiaries. That being said, a tax transparency treatment is accorded to beneficiaries who are (i) resident in Singapore, and (ii) entitled to the trust income under the trust. In this case, the tax will not be applied at trustee level; instead, the beneficiaries are subject to tax on the distributions received and will enjoy the concessions, exemptions and foreign credits that may be available to them. This treatment does not apply to resident beneficiaries who are not entitled to the trust income.

Separately, the income derived by the trustee from carrying on its trade or business is subject to final tax at the trustee level.

Tax exemption is available for specified income that is derived by qualifying Foreign Trusts (QFTs) and their underlying holding companies. A QFT is a trust created by deed where all of the settlors and beneficiaries are foreigners (i.e. neither citizens nor residents of Singapore), and administered by an approved trustee company. The income that is exempted from tax includes income from the following sources:

·         Interests and dividends derived from outside Singapore and received in Singapore in respect of any designated investments.

·         Rents, royalties, premiums and any other profits arising from property derived from outside Singapore and received in Singapore.

·         Gains or profits derived from sale of any designated investments.

·         Distributions from foreign unit trusts derived from outside Singapore and received in Singapore.

 

For the purpose of tax exemption, subject to certain conditions, a trust shall continue to be regarded as a QFT notwithstanding that any settlor or beneficiary of the trust who is an individual subsequently becomes a citizen or resident of Singapore.

There is no capital gains tax in Singapore, Estate Duty was abolished in 2008. Therefore, the distribution of capital from Singapore trusts are exempt from tax and successors of a Singapore trust can be included as beneficiaries without any estate duty. This facilitates estate planning. Only the distribution of income from the estate is taxable.

There is no exchange control, and funds may be freely remitted to and from Singapore. As such, there are no controls to impeded any additions to trust assets subsequent to its formation.

A Singapore trust will not be void or voidable in the event of the settlor’s bankruptcy or liquidation. However, the court may set aside a trust against claims made by the settlor’s creditors if it is proven to the satisfaction of a Singapore court that the trust was made with the intent to defraud the settlor’s creditors. 

Furthermore, for a foreign trust, the local tax laws do not require disclosure of the identities of the settlor nor the beneficiaries. There is no requirement for the foreign trust to be registered, nor for the trust instrument to be filed with any government authority.

However, FATCA reporting must comply.

A discretionary trust structure protects assets such as property, money and shares, also including avoiding probate. A living trust does not go through probate, which often means a faster distribution of assets to heirs. A Living Trust is not made public, thus, providing confidentiality.

A private family trust is usually designed to help a high net-worth individual to preserve assets and facilitate the transfer of assets to future generations. Trusts provide continuity in the administration of assets. A properly setup trust ensures protection of assets and can provide continuity of benefits to family members across generations. 

As long as there is no distribution income to the beneficiary, they would not subject to any tax in the US.

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