Economic Substance & the 2025–2027 Changes to 13O / 13U
What MAS tightened on 1 January 2025 — AUM tests, spending tiers, capital deployment — and the FY2027 deadline for existing funds.
Economic substance is the set of real-presence conditions a fund must meet to keep its Singapore tax exemption — genuine AUM, a Singapore investment team, and real local spending. On 1 January 2025, MAS tightened these conditions across Section 13O and Section 13U. The headline: 13O picked up a S$5M AUM test and a two-investment-professional rule it never had before; local business spending moved from a flat figure to tiered bands; and the AUM test must now be met at the end of every financial year, not only at application.
This page is part of the Singapore fund tax incentives hub. If you are choosing a scheme, start with the 13O vs 13U comparison.
What changed on 1 January 2025?
- 13O gained an AUM floor: S$5M in designated investments, where previously it had none.
- 13O gained a headcount rule: two investment professionals (≥1 non-family), matching the substance logic already applied to 13U's three.
- Local business spending became tiered: the old flat S$200k gave way to bands scaling with AUM.
- The AUM test became annual: both schemes must meet their AUM threshold at the end of every financial year, not just at application.
What are the local business spending tiers?
| Fund AUM | Minimum annual local business spending |
|---|---|
| Below S$250M | S$200,000 |
| S$250M – S$2B | S$300,000 |
| Above S$2B | S$500,000 |
Qualifying spend includes fees paid to Singapore-based fund administrators, auditors, tax advisers, lawyers and the local management team.
What is the capital deployment requirement (CDR)?
For family-office-linked funds, MAS also expects a minimum deployment of capital into Singapore-linked or otherwise eligible investments. Broadly, the capital deployment requirement is 10% of AUM or S$10M, whichever is lower. Certain investment categories are recognised with multipliers — for example 1.5x or 2x credit toward the target — to encourage deployment that benefits the Singapore ecosystem. These figures are best-estimates; confirm the current CDR and qualifying multipliers with MAS.
Do existing funds have to comply immediately?
No. Pre-2025 awards generally have a transition window: existing 13O and 13U funds have until their financial year ending 2027 to meet the new conditions. That gives time to grow AUM, hire the required investment professionals and ramp local spend. New applicants, however, are assessed against the current rules from the outset.
How does this affect a VCC?
The substance conditions attach to the fund and its manager, not the wrapper, so they apply equally whether you use a company, LP or VCC. A VCC umbrella can help by pooling AUM across ring-fenced sub-funds under one award and concentrating local spend. Family offices feel these changes most — see family office structures — and we cover filing in how to apply via MAS.
Worried about the 2027 deadline?
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Check my eligibility →Frequently asked questions
What changed for 13O and 13U in 2025?
From 1 January 2025, MAS tightened economic substance: 13O gained a S$5M AUM test and a two-investment-professional rule, local business spending moved to tiered bands, and the AUM test must be met at the end of every financial year, not just at application.
What is the local business spending requirement now?
It is tiered by AUM: funds below S$250M spend at least S$200k a year, S$250M-2B at least S$300k, and above S$2B at least S$500k. The old flat S$200k figure no longer applies across the board.
Do existing 13O/13U funds have to comply immediately?
Existing pre-2025 awards generally have until their financial year ending 2027 to meet the new conditions, giving funds a transition window to build AUM, headcount and local spend.
What is the capital deployment requirement?
Family-office-linked funds face a minimum capital deployment into Singapore-linked or eligible investments, broadly 10% of AUM or S$10M (whichever is lower), with multipliers recognising certain investments at 1.5x or 2x toward the target.
VCC Singapore is an independent informational resource and is not a regulator, law firm or tax adviser. Tax thresholds and conditions are set by MAS/IRAS and change periodically — confirm the current figures before acting. This page is general information, not legal, tax or financial advice.