The IBSA Podcasts

The Lure of Singapore for High-Net-Worth-Individuals

• Lucie • Season 3 • Episode 2

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Ever wondered why Singapore is a magnet for high-net-worth individuals? Discover the secrets behind the city-state's allure as we sit down with Derren Joseph from Moores Roland Asia Pacific, in a riveting conversation hosted by Roy Saunders, Founder and Chairman of the International Business Structuring Association (IBSA). Derren, a seasoned international tax advisor, sheds light on the compelling reasons why millionaires are flocking to Singapore, a place known not only for its strategic tax policies but also for its high quality of life. With data-driven insights from Credit Suisse and Warwick University, you'll gain a nuanced understanding of the factors that make Singapore a top choice for the global elite.

This series of podcasts explores the beneficial tax regimes in Italy, Spain, Portugal, Malta, Cyprus, Switzerland, Singapore, Israel and Dubai in respect of where UK residents may wish to emigrate in light of the non-dom changes introduced by the Conservatives, and the likely tightening of these rules under the new Labour government.

 

Speaker 1:

Hello and welcome to this IBSA series of podcasts on considering countries to where UK residents may wish to emigrate, in light of the non-don changes introduced by the Conservatives and the likely tightening of these rules under the new Labour government, including bringing foreign trust assets within inheritance tax and increasing capital gains tax rate to income tax levels, and particularly those aiming at fund managers. My name is Roy Saunders, founder and chairman of the IBSA, the International Business Structuring Association, which is a multidisciplinary global association of entrepreneurs and their professional advisors, dedicated to sharing their expertise with each other within a great networking platform. Our current series of 15-minute podcasts will review beneficial tax regimes in Italy, Spain, Portugal, Malta, Cyprus, Switzerland, Singapore and Dubai. So today I'm joined by Darren Joseph of Moors, Roland Asia Pacific, who's an international tax advisor primarily based in Singapore, but who seems to be popping up in lots of other countries as well, and who has worked in international finance all of his adult life. Darren, we've had a lot of chats together. Could you start perhaps by talking about Singapore's popularity for high net worth individuals?

Speaker 2:

Roy, thank you very much Once again. It's an honour and privilege to have a quick chat with you.

Speaker 2:

My name is Darren Joseph, with HEDtax, which is a member of Moor's role in Asia Pacific. So we're a team that seeks to demystify the sometimes confusing world of cross-border tax, working with private clients all over the world. Now, in terms of the popularity of Singapore I've been based in Singapore for just over 10 years now and I think its reputation does precede it. However, the vast majority just looking at the data, the vast majority of immigrants into Singapore are actually from within Asia itself, from within the Asia-Pacific region. Their population is roughly for those who aren't familiar with it, they're about 6 million people in Singapore. Roughly 40% are, let's say, international talent, so workers from outside of Singapore on temporary work permits and that includes permanent residents as well but 60% citizens. So, in terms of the overall topic that you're seeking to explore, roy, there are only about 50,000 Brits in Singapore, so that's quite small by comparison.

Speaker 2:

Now, the Credit Suisse there's a lot of data out there for those who really want to get into the data. Unfortunately, sometimes a lot of it is advocated by, I guess, private sector organizations, which may or may not have their own agenda, sector organizations which may or may not have their own agenda. Uh, but you know, be that as it may, you can question the methodology, but credit swiss research institute, uh, I think they do a decent job at pulling out data and they do a global wealth report every year and according to them, they're about 330 odd thousand millionaires in Singapore.

Speaker 1:

Wow.

Speaker 2:

And they kind of break that down into. You know how many are ultra high net worth, I guess, with, I guess, assets in excess of 50 million and those who are just regular high net worth. So roughly it's about 6.7, let's say, around 7% of the adult population in Singapore are millionaires. Wow, population in Singapore are millionaires and they and they do expect that that number is going to jump to over 430 odd thousand come 2025. So I mean putting that in perspective yeah.

Speaker 1:

What are the benefits to them of coming to Singapore? What? Why do uh high net worth individuals and millionaires base themselves? Is it? Foreign income is exempt from tax. What is the income tax levels, and so on.

Speaker 2:

So here you know, again, I'm going to swim against the tide and I think that for high-debt individuals, their primary directive is never really taxation. Of course there are exceptions to the rule, but when we look at the research from, like, warwick University they did a paper recently London School of Economics, of course, henley and Partners and Christabel Young, who I always quote from Cornell University, I think when you look at a hard for peer reviewed research, there is consensus that it is not tax driven, despite what influencers and social media want us to consider. It is part of the attractiveness, I'd say, as someone who's based in Singapore and interacting with other intermediaries, I think there's a common term that we use in Singapore, called soft factors, to explain the popularity of Singapore. It's English language is, you know, is English language. It's also based on English common law as a former UK colony. I don't know if that's politically correct term, but that's what it is, so there's a level of familiarity with it.

Speaker 2:

It has arguably the most efficient government on earth. When you go through the immigration process, it is incredibly smooth and, of course, safety in an era where one has to be conscious of those types of unfortunate issues. And when you put on top of that. When you look at the list, however, you want to rank it of the top banks in the world in terms of liquidity ratios and stability, you're going to see the three Singapore indigenous banks in that top 20. I mean, I was looking at Global Finance Magazine earlier. When you look at world class universities, like if you look at the Times Higher Education education ranking, again, you're going to see a Singapore university in the top 20 and US. So you have the infrastructure, the soft infrastructure, that makes it really attractive.

Speaker 2:

Now, put on top of that the fact that, yes, it does have it's not a new tax jurisdiction, but it is a relatively low tax jurisdiction. It is territorial tax. Corporate income tax is headlines at 17%, but with deductions and et cetera, the effective tax rate is it's not unusual for it to be lower. In terms of personal income tax, it goes all the way up to 24%, I think it is. So again, it's not low tax but it is attractive. But again, I argue that it is the wider real soft factors that make Singapore attractive.

Speaker 1:

But you're saying it is territorial. So, like most countries which try and attract high net worth individuals, foreign income and gains are exempt from tax.

Speaker 2:

Correct. But then again, when you look at the list of jurisdictions that are successful in attracting high net worth individuals, the majority of them are not territorial. Correct, but it is territorial, but it is territorial to your point.

Speaker 1:

Yes, OK, and these individuals are residents in Singapore, so they can take benefit from Singapore's double tax treaties. Are there saving clauses within the double tax treaties that say only if the income is taxed in Singapore could you use double tax treaties to protect foreign income Singapore?

Speaker 2:

could you use double tax treaties to protect foreign income? I think yeah. I mean, you know the normal anti-abuse protocols would apply. So you'd need to have decent substance. And even in terms of avoiding to enjoy the benefits of a territorial tax regime, it is helpful, depending on the income, that that income was taxed in the foreign jurisdiction from which it's sourced. So in certain circumstances, if income arises outside of Singapore and it comes into Singapore having not been taxed outside of Singapore, it could in turn be taxed in Singapore, which doesn't make it a pure play territorial tax jurisdiction, but it also reinforces the point that its popularity is not driven by tax.

Speaker 1:

Yeah, that's interesting and that is perhaps a cause for concern for people who are trying to get tax-free income, but nevertheless, I take your point about the non-tax considerations. What sort of mechanisms do high net worth individuals have when they come to Singapore? Do they create trusts or things like that in advance of coming Well?

Speaker 2:

because it is not a high tax jurisdiction and because it, generally speaking, doesn't tax you in a worldwide income. You know it kind of means that you don't need to spend an in or out amount of time in pre-immigration tax planning as you would if you're in Singapore to modify your international tax structure to optimize it across the various jurisdictions to which you're exposed. So Singapore ceases to be your biggest consideration. It's the other jurisdictions from where your income may arise that you're trying to optimize.

Speaker 1:

I mean, I know that a lot of people used to go to Hong Kong, for example. Singapore seems to have taken over from Hong Kong to a large extent, for obvious reasons, I guess. Are you finding people coming from, or particularly expats coming from Hong Kong over to Singapore?

Speaker 2:

Yeah, I mean definitely. That is somewhat of a cliche. They you know the whole influx, not just from Hong Kong, but from Taiwan as well, and from mainland China. However, there is an argument that, now that Hong Kong has achieved a steady state, that individuals, high net worth individuals, service providers and some funds are returning to Hong Kong. And the reason why is that if you're really making a China play, arguably you need to be in Hong Kong. Like you know, you need to be in Hong Kong, and if the rules are what they are, you just need to play by those rules. So I think, as a gateway to China, it's hard to beat Hong Kong.

Speaker 1:

OK, ok. Well, I think you know what you've said, which is very interesting, and I will be talking to lots of other advisors about the beneficial tax regimes in their jurisdictions. I think what you said about the non-tax considerations is probably the most important thing, so you're not really swimming against the tide. I think I agree totally with you. I know I had a client that was selling his company and going to Jersey so many years ago now and I said to him you know what does your wife think about this? And he said oh no, she, she, she's happy, she's staying in the UK and staying with the grandchildren. And, of course, what happens? They get divorced. He loses far more money than the tax that he would have saved, and so there are lots of non-tax considerations and I completely agree with you. Well, look, thanks very much for joining me. I only wanted this to be a really brief introduction to Singapore, but it does sound very interesting, and thanks for joining me. Thank you everybody for listening.

Speaker 2:

Thank you very much, Roy. We'll see you next time.