Enhancements to fund management tax incentives in Singapore and Hong Kong

Background

On 19 August 2026, the Monetary Authority of Singapore (MAS) introduced a slew of measures to strengthen Singapore’s position as a fund management hub, including changes to tax incentives and employment schemes for top-tier fund management professionals.

While details of the specific measures remain forthcoming, this announcement came shortly after Hong Kong introduced the Inland Revenue (Amendment) (Preferential Tax Regimes for Funds, Family-owned Investment Holding Vehicles and Carried Interest) Bill 2026 (Hong Kong Bill) in June 2026 to enhance tax incentives for funds and support its own fund management sector.

We summarise below the core aspects of the recent tax-related changes introduced across the two financial hubs in Asia.

Overview of tax incentives for funds – Singapore

Background: Singapore already has existing tax exemptions applicable to funds managed by Singapore-based fund managers that hold (or are exempt from holding) a capital markets services licence. The exemptions cover all income (other than certain specifically excluded categories) derived from designated investments by such funds. The scope of designated investments is wide and would cover most types of assets held by a fund, although investments in Singapore real estate are carved out.

Tax exemptions commonly relied upon include the following:

Statutory Provision	Scope
Section 13D of the Income Tax Act 1947 (ITA)	This exemption applies to non-resident individuals, companies, or trusts meeting certain requirements and is generally targeted at offshore funds. The fund manager is required to employ at least one (1) Singapore tax-resident investment professional, although there is no minimum fund size or local business spending requirement. This is a self-assessed scheme that does not require MAS approval.
Sections 13O and 13OA of the ITA	This exemption applies to funds domiciled in Singapore, specifically companies incorporated in Singapore (for S13O) or limited partnerships registered in Singapore (for S13OA), and that are tax-resident in Singapore. The fund manager is required to employ at least two (2) Singapore tax-resident investment professionals. The fund must also allocate a minimum amount of assets under management (AUM) to designated investments (SGD 5 million for non-single-family offices) and satisfy local business spending requirements (ranging from SGD 200,000 to SGD 500,000 for non-single-family offices depending on AUM). Funds relying on this exemption must apply to MAS for approval and submit annual declarations confirming that the relevant conditions are satisfied.
Section 13U of the ITA	This exemption applies to approved standalone fund vehicles or fund structures (including master-feeder funds, master-feeder-SPV structures, and master-SPV structures). Funds can be constituted flexibly (including offshore), though structures holding investments via SPVs require the master fund to be Singapore-incorporated and tax-resident. The higher minimum fund size (SGD 50 million) distinguishes S13U from S13O/13OA, and managed accounts can also qualify. The fund manager is required to employ at least three (3) Singapore tax-resident investment professionals. The fund must also allocate a minimum amount of AUM to designated investments (SGD  50 million for non-single-family offices) and satisfy local business spending requirements (ranging from SGD 200,000 to SGD 500,000 for non-single-family offices depending on AUM). Funds relying on this exemption must apply to the MAS for approval and submit annual declarations confirming that the relevant conditions are satisfied.
Section 13V of the ITA	This is a specific exemption for sovereign funds.

Carried interest incentive for Singapore fund managers

One of the key changes announced by the MAS and the Ministry of Finance is a proposed income tax exemption for profit-related returns arising from the provision of fund management services to funds that already qualify for existing tax exemptions.

While the announcement does not elaborate, the proposed tax exemption is likely to apply to Singapore-based fund managers and their investment professionals, covering their share of investment profits earned (although base salaries, bonuses, and other types of remuneration will be excluded).

Recent changes in tax incentives for funds – Hong Kong

One of the key changes introduced by the Hong Kong Bill is the expansion in scope of the type of funds that will qualify for tax exemption, now including sovereign funds, pension funds, endowment funds, and single investor funds (meeting a minimum threshold of qualifying investments). This brings the Hong Kong regime into closer alignment with Singapore, which already contains a specific exemption for sovereign funds and allows managed accounts to be tax-exempt subject to applicable conditions.

As with the approach in Singapore, the Hong Kong Bill introduces new economic substance requirements to qualify for the tax exemptions, which can be met at the fund or fund manager level. These include:

1. having at least two (2) full-time qualified employees resident in Hong Kong carrying out investment management activities; and
2. incurring at least HKD 2 million of annual operating expenditure in Hong Kong, specifically in relation to investment and management activities.

The Hong Kong Bill will also introduce reporting requirements for funds seeking to rely on the exemptions. Fund managers will be required to file a notification with the Inland Revenue Department of Hong Kong within six (6) months from the commencement of fund management activities. While further details of the reporting requirements remain forthcoming, the notification is expected to include the fund’s accounts and supporting documents to prove that the relevant exemption conditions are satisfied.

Recent changes in carried interest incentive for Hong Kong fund managers

The Singapore announcement is closely aligned with another key proposal in the Hong Kong Bill, which enhances an existing carried interest incentive for Hong Kong fund managers and their employees. The scope of qualifying fund managers is not only limited to those licensed by the Securities and Futures Commission or authorised financial institutions (i.e., banks), which do not require a licence, but also includes unlicensed fund managers of certain private funds.

The Hong Kong Bill will also expand the scope of “eligible carried interest” to cover not only profits from private equity transactions but also those arising from a wider range of asset classes. As in Singapore, real estate in Hong Kong will be carved out from the list of eligible asset classes.

Preliminary takeaways

Until the dust settles, the fund management industry in Asia will likely take a “wait and see” approach, pending further details on the tax incentives offered by both jurisdictions, to weigh the pros and cons of determining the location of their APAC hub. At this juncture, some high-level questions that a fund manager with operations in Asia, or looking to establish an Asian hub, should consider are:

1. What types of fund structures can I opt for while still ensuring that I qualify for tax relief?
2. What types of assets can I invest in and still qualify for tax relief? Is there a location better suited to my fund(s)’ investment focus and strategy?
3. How many investment professionals do I need to hire locally? What qualifying criteria would restrict the hiring pool (e.g., years of experience, professional qualifications)?
4. Would the talent I need be based locally? How difficult is it for fund managers and investment professionals to claim tax relief for carried interest or investment-related profits?
5. How large must my fund’s AUM be to qualify? What type of assets can I count towards the qualifying AUM?
6. What are my expected spending and cost commitments? What types of in-jurisdiction spending would qualify (e.g., is it limited to hiring investment professionals, or can I also include set-up costs, professional adviser fees, and similar expenses)?
7. What compliance obligations would apply on an ongoing basis to maintain tax relief qualification? How difficult is it to compile the required information for reporting to the tax or financial regulator?

Ultimately, both jurisdictions offer different value propositions, and there is not necessarily a “one size fits all” approach to determining how to structure fund management, servicing, and sales and marketing operations in Singapore and/or Hong Kong.

This summary is provided for general informational purposes only and does not constitute tax advice. If you would like to discuss your plans with us or seek our advice on how the upcoming changes to the tax regimes may affect your fund management business, please reach out to any of the lawyers below or your regular Reed Smith contact to work with your tax advisers. 

Client Alert 2026-173