Singapore is considering introducing additional tax incentives for investment firms as it seeks to preserve its status as a leading hedge fund hub amid growing competition from Hong Kong, according to a report by the Financial Times.
Thew reports the unnamed people familiar with industry discussions as revealing that the Monetary Authority of Singapore (MAS) has been consulting investment managers in recent months on measures to strengthen the city-state’s competitiveness, following concerns that proposed tax reforms in Hong Kong could encourage portfolio managers to relocate.
Industry participants have warned the regulator that Hong Kong’s planned changes to the taxation of carried interest and performance-related income could make the territory significantly more attractive for hedge fund professionals and other alternative investment managers.
The proposals under consideration in Hong Kong would allow profits from a broad range of investment strategies to qualify for zero-rate carried interest tax treatment, potentially benefiting hedge funds, private equity, venture capital, private credit firms and family offices.
Market participants have reportedly told MAS that, unless Singapore enhances its own tax framework, firms may increasingly establish investment teams in Hong Kong or relocate key portfolio managers to take advantage of the more favourable regime.
The discussions mark a notable shift in regional dynamics. During and immediately after the Covid-19 pandemic, Singapore attracted a wave of hedge funds, family offices and financial professionals relocating from Hong Kong amid political uncertainty and pandemic-related restrictions.
Rather than matching Hong Kong’s proposals directly, Singapore is also exploring broader measures aimed at lowering operating costs for investment firms. Industry sources suggest policymakers may favour reducing the cost of doing business instead of offering additional personal tax breaks, allowing firms greater flexibility to improve compensation packages for investment professionals.
Among the options reportedly being evaluated is a reduction in the tax rate applied under a preferential corporate incentive programme, which currently taxes qualifying investment businesses at 10%, compared with Singapore’s standard corporate tax rate of 17%.
For hedge fund managers, the outcome of the discussions could influence future decisions on where to base investment teams and trading operations, particularly as competition between Asia’s two leading financial centres intensifies.
In a statement, MAS said it is reviewing measures designed to strengthen Singapore’s position as a trusted and competitive global financial centre for investment firms and talent.
