Singapore answers Hong Kong's tax cut with tax-free profits, multi-employer visa

Singapore has announced tax-free profits and a multi-employer visa in response to Hong Kong's recent tax cuts, according to Bloomberg. The measures will take effect in 2027, with details to be revealed during the Budget in February. Chee Hong Tat, Minister for National Development, stated that sharing plans with the industry is crucial as firms decide on locations and business expansions.

MAS and the Ministry of Finance will exempt profit-related returns from fund management services for qualifying funds. This exemption includes the share of a fund's profits paid to corporate entities, partnerships, or individuals, excluding salaries and bonuses. Funds must be Singapore-based and meet economic substance requirements, such as minimum headcount. The exemption applies to the 2026 calendar year's earnings.

The exemption mirrors Hong Kong's plan to cut taxes on carried interest and performance fees, which Hong Kong implemented on June 12, backdated to April 2025, and cleared its first reading on June 24. The Alternative Investment Management Association expressed concerns that the proposals might widen the effective tax gap between the two centers.

Chee Hong Tat clarified that Singapore does not view Hong Kong as a direct competitor and emphasized the region's potential for growth as a financial hub, focusing on trust, stability, regulatory framework, and talent access.

MAS and the Ministry of Manpower will introduce an investment management track to the Overseas Networks and Expertise Pass, allowing holders to work for multiple companies or start businesses without reapplying. The current salary threshold for this pass is S$30,000, with a separate pathway for individuals with outstanding achievements in various fields.

MAS plans to refine salary assessments to recognize returns linked to investment performance and fund outcomes, considering these as significant components of pay for specialized fund management work.

MAS will also invest alongside hedge fund managers committed to establishing or expanding in Singapore through a new investment program, aiming to build the surrounding ecosystem, including ancillary service providers and prime brokerages. The asset management sector accounts for around 15% of Singapore's financial sector output and 13% of its employment, with close to 25,000 jobs, 80% of which are held by locals.

The industry has grown at an average of 7.5% annually over the past five years, with assets under management reaching S$6.7 trillion as of the end of 2025, driven by strong market performance and net inflows of S$376 billion, up 29%.