Economic Substance & the 2025–2027 Changes to 13O / 13U
Changes to AUM, staffing and local spending requirements from 2025, with subsequent amendments and transitional arrangements.
Economic substance is the set of operating conditions a fund must meet to keep its Singapore tax exemption — qualifying assets, a Singapore investment team, and local business spending. On 1 January 2025, MAS tightened these conditions across Section 13O and Section 13U. The changes introduced a S$5M AUM test and a requirement for two investment professionals; local business spending moved from a flat requirement to tiers; 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.
Update — August 2026: MAS Circular FDD Cir 05/2026 (31 July 2026) now formally separates the commercial (non-SFO) and family-office (SFO) condition sets under sections 13O, 13OA and 13U — different minimums (S$5M vs S$20M at 13O), different spending tiers, and a capital deployment requirement that applies to SFO funds only. Our full two-track breakdown.
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, then track-specific: the test became annual for both schemes from 1 January 2025; MAS then removed that annual re-test retroactively for funds under a licensed manager in FDD Cir 05/2026 (1 August 2026), keeping it only on the single-family-office track, where the 13O/13OA minimum is S$20 million.
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.
Review your fund’s compliance timetable
Set out your current AUM, investment team and local spending to request an introduction to a fund-services provider who can assess the applicable conditions.
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?
Not on a fixed runway. Funds under a licensed manager had the 2025 annual re-test removed retroactively by MAS FDD Cir 05/2026; existing family-office awards are bound by their vintage, with modified conditions applying from the year of assessment whose basis period ends on or after 1 August 2026, which in effect gives 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.