Singapore VCC insights

13O and 13U Local Business Spending: The 2026 Tiers, Donations and What a Shortfall Costs

By VCC Editorial Team · Published 27 October 2026

Short answer: Under MAS FDD Cir 05/2026, a single family office (SFO) fund under section 13O or 13U must spend S$200,000, S$500,000 or S$1,000,000 locally, set by its year-end assets in designated investments. In the upper two tiers, donations and blended finance grants can fill part of the gap above an S$300,000 or S$500,000 floor. Fail, and that year’s exemption is lost.

This article is general information only and is not legal, tax or investment advice. For matters needing legal advice, we work with a panel of experienced Singapore law firms.

The 13U local business spending condition is the economic test a family office meets every year, in cash. MAS rewrote it in FDD Cir 05/2026: SFO funds can now meet part of it through charitable giving and blended finance grants, but only above a hard floor of ordinary Singapore spending. This article covers the tiers, what counts, how donations and grants are scored, when the test is measured and what a shortfall costs. Sources were checked on 27 October 2026 against the circular and MAS’s family office page.

What is the 13U local business spending condition now?

It is a minimum amount of qualifying spending a 13O, 13OA or 13U fund must incur in each basis period, with the amount set by the fund’s AUM in DI at the end of that period. SFO funds and funds run by licensed managers (non-SFO funds) have separate regimes.

The MAS circular defines LBS as “operating expenses recognised based on accounting principles (including but not limited to remuneration, fund management fees and other operating costs) that are paid to contracting parties in Singapore” (footnotes 15 and 89). For SFO funds, paragraph 4.5(a) uses a wider label, “local spending”: LBS plus, in the upper tiers, eligible donations and blended finance grants. The floor in each tier is a pure LBS figure.

For a 13U structure with feeder funds or special purpose vehicles (SPVs), Annex 7 paragraph 3 applies the AUM in DI and LBS conditions “at the S13U structure level as though the structure is a standalone fund vehicle, regardless of the number of feeder fund(s) or SPV(s) in the structure”. One threshold covers the whole structure, and on our reading spending by any approved entity counts.

What are the local spending tiers for SFO funds under 13O and 13U?

Three tiers, set out in Table C of the circular for “S13O/OA and S13U SFO funds” and repeated in Annex 6B paragraph 1(c). They apply to new SFO awards approved on or after 1 August 2026 and, under the revised Annex 6B table for 13O and 13OA, to existing 18Apr22 and 5Jul23 awards.

AUM in DI at end of basis period	Minimum local spending	Of which LBS at least	Maximum met by donations and grants
Below S$250 million	S$200,000	S$200,000	None: LBS only
S$250 million to below S$2 billion	S$500,000	S$300,000	S$200,000 of recognised value
S$2 billion or more	S$1,000,000	S$500,000	S$500,000 of recognised value

The last column is our arithmetic from the circular’s tier totals and floors. “Recognised value” means grants after the 2x multiplier, so the S$200,000 gap can be closed with S$100,000 of grants.

The circular itself applies the same tiers and partial route to 13U. Paragraph 4.5(a) says “An S13O/OA or S13U SFO fund may partially meet the minimum local spending condition via eligible donations and grants”. MAS’s family office page shows the same table under both scheme columns. The 13U detail sits in Annex 7B, which was not in the circular text we could extract, so a 13U fund should read it alongside its award letter.

Existing pre-18Apr22 awards stay on S$200,000 of total business spending (TBS), operating expenses “regardless of contracting parties” (footnote 100). Placing an award in its vintage is covered in our guide to single family office tax reforms by condition set.

What are the non-SFO tiers, and how does the transition work?

Funds managed by a licensed fund management company face lower LBS tiers, with no donation or grant route. Tables A (13O and 13OA) and B (13U) are identical.

AUM in DI at end of basis period	Non-SFO minimum LBS	SFO minimum local spending (for comparison)
Below S$250 million	S$200,000	S$200,000
S$250 million to below S$2 billion	S$300,000	S$500,000 (LBS at least S$300,000)
S$2 billion or more	S$500,000	S$1,000,000 (LBS at least S$500,000)

The SFO LBS floors equal the non-SFO tiers; the SFO excess can come from philanthropy and blended finance.

The non-SFO transition differs by scheme, and the wording matters:

• 13O and 13OA non-SFO funds: paragraph 3.4(c) sets S$200,000 of TBS for years of assessment (YAs) before YA 2028 and the tiered LBS from YA 2028 (applied by award date in Annex 6A paragraph 2).
• 13U non-SFO funds with awards before 1 January 2025: paragraph 3.6(c) sets “the minimum LBS condition of S$200,000” for YAs before YA 2028, then Table B. This is an LBS test, so overseas costs do not count even in the transition.

Non-SFO funds with awards from 1 January 2025 may also elect the closed-end fund treatment, which tests LBS cumulatively to the tenth incentive year and waives it from the eleventh (paragraph 3.9). Our article on closed-end fund treatment for 13O and 13U covers the election.

What counts as 13U local business spending, and what does not?

Operating expenses, recognised under accounting principles, paid to contracting parties in Singapore count. Expenses paid to parties outside Singapore do not, and nor does anything that is not an operating expense. The circular gives three examples: remuneration, fund management fees and other operating costs.

Item	Counts as LBS?	Basis
Management fee paid by the fund to its Singapore SFO	Yes, on our reading	“Fund management fees” paid to a Singapore contracting party (footnote 89)
Remuneration borne by the fund for Singapore staff	Yes	“Remuneration” listed in footnote 89
Fees to a Singapore fund administrator, auditor or corporate secretary	Yes, on our reading	Other operating costs paid to Singapore contracting parties
Fees to an overseas custodian, adviser or administrator	No	Contracting party not in Singapore; counts only for the pre-18Apr22 TBS test (footnote 100)
Cost of acquiring investments	No, on our reading	Not an operating expense
Donations and blended finance grants	Not LBS	A separate component of SFO local spending, above the LBS floor

The test looks at where the contracting party is, not where the service is consumed, so a fee billed by an overseas group entity fails even if the work is done in Singapore. For an SFO, the cleanest LBS is often the fund’s management fee to the Singapore family office, which also pays the investment professionals the scheme requires. The headcount test is covered in our 13O vs 13U decision guide for a new SFO fund.

How do IPC donations and blended finance grants count?

Donations count at face value and grants at twice their value, and both count only above the LBS floor in the upper two tiers. Both must be made by the fund. Footnote 23 refers to “Eligible donations by the S13O/OA/U SFO fund”, not by the family or the family office company.

Eligible donations are “limited to donations to Singapore Registered Charities, Exempt Charities, or Institutions of Public Character”. They “exclude Grantmakers under MCCY’s Grantmaker Scheme”. Charities and IPCs are regulated under the Charities Act 1994. IPC status is a further approval by the Commissioner of Charities. The Charity Portal lists prerequisites including that activities “exclusively benefit the community in Singapore as a whole” and that at least half of the governing board are Singapore citizens. A donation to an overseas charity, or to a family foundation that is not a registered charity, does not count. Donation receipts “have to be submitted to MAS upon request if the fund is selected for review”.

Grants are “contributions with no return of principal and income” (footnote 24). Blended finance is “the use of catalytic capital from public or philanthropic sources to increase private sector investment in sustainable development” (footnote 25). The instrument must be distributed by a licensed financial institution in Singapore. The multiplier is stated plainly: “eligible grants of S$100 will be recognised as S$200 of local spending”. The circular states no multiplier for donations, so they count at face value.

Do not confuse this with the capital deployment requirement, where blended finance instruments held as investments also earn a 2x multiplier (paragraph 4.5(b)); see our guide to the capital deployment requirement.

A worked illustration with hypothetical figures: a 13U master-feeder structure has S$600 million of AUM in DI at 31 December 2027, so it needs S$500,000.

1. LBS: S$250,000 management fee to the Singapore SFO, S$60,000 to a Singapore fund administrator and S$30,000 of Singapore audit and secretarial fees, totalling S$340,000. This clears the S$300,000 floor.
2. Donations to two Singapore IPCs: S$60,000, counted at S$60,000.
3. A grant to a blended finance instrument distributed by a Singapore licensed bank: S$50,000, counted at S$100,000.
4. Total recognised: S$340,000 + S$60,000 + S$100,000 = S$500,000. The condition is met.

Change one input: with LBS of S$280,000 and donations of S$300,000, recognised spending is S$580,000, yet the structure fails because LBS is below the S$300,000 floor.

How is the 13U local business spending test measured?

Once a year, by basis period. The tier is fixed by AUM in DI “as at the end of the basis period”, and spending is counted over that basis period. The basis period is “the financial year or period preceding the Year of Assessment” (footnote 9). The circular states no averaging of AUM across the year. Two features make the year-end figure decisive.

First, the tiers are cliffs, not bands. An SFO fund at S$249 million needs S$200,000; at S$251 million it needs S$500,000, with at least S$300,000 of LBS. Late-year market moves can change the target after most spending is fixed.

Second, the AUM that sets the tier is broader than the AUM that meets the entry threshold. Investment in the family’s operating businesses cannot count towards the S$20 million or S$50 million minimum. Footnotes 22 and 84 say it “shall count towards the SFO fund’s AUM in DI for the purposes of all other conditions, if the investment qualifies as DI”. On our reading, that includes the spending tier, so a large family business stake can push a fund into a higher tier.

Part years are prorated; full years are not. Where an award starts or ends mid-period, conditions are met only for the days in the award (Annex 7 paragraph 2; Annex 6 paragraph 2). In the circular’s 13U example, an S$200 million fund with a 31 December year end starting on 1 October 2026 has its S$200,000 condition for YA 2027 “prorated to S$50,411” (92 days out of 365). “The conditions will not be prorated for all other basis periods.”

For 13U funds on the committed capital concession (real estate, infrastructure, private equity, debt or credit funds), Annex 7 paragraph 16 computes the “annual tiered LBS condition” by reference to “the amount of committed capital or the actual AUM in DI, whichever is higher”. A large undrawn commitment can therefore set a higher tier than the assets actually held.

A year-end routine that follows the circular’s mechanics:

1. In the third quarter, project year-end AUM in DI, including family business holdings that are DI, and identify the likely tier.
2. Split year-to-date operating expenses between Singapore and overseas payees, and confirm the LBS floor before relying on donations or grants.
3. Confirm each donee is a Singapore Registered Charity, Exempt Charity or IPC and not an MCCY Grantmaker; for grants, keep evidence of the instrument and its Singapore distributor.
4. File receipts and the computation in the annual evidence file for 13O and 13U.

What does a shortfall cost?

The exemption for that year, in full. Paragraph 2.4 states that funds unable to meet any economic condition in a basis period “will not be able to avail themselves of the tax exemption for that basis period”. For a 13U structure, Annex 7 paragraph 7 is explicit that “all the entities in the S13U structure” lose the exemption for the corresponding YA. The circular provides no partial exemption for a near miss, and no carry-forward of excess spending from one year to the next outside the closed-end treatment for non-SFO funds.

The loss is not permanent: a fund that meets all economic conditions in a later basis period can claim the exemption for that YA. Permanent revocation is reserved for non-economic failures, such as “failure to provide supporting documents upon request”, or a serious offence. A fund that meets the number but cannot produce donation receipts or LBS workings when selected for review turns a one-year problem into a revocation risk.

Frequently asked questions

Can a 13U SFO fund below S$250 million use donations to meet the condition?

No. In the lowest tier the requirement is S$200,000 of LBS, and donations and grants are not part of that tier’s composition in Annex 6B or on MAS’s family office page.

Do donations made by the family office company or a family member count?

The circular refers to eligible donations “by the S13O/OA/U SFO fund”. Donations made by another entity are not described as counting, so they should be made by the fund itself. For a 13U structure, on our reading, a donation by an approved entity within the structure is the safer route, given the structure-level test.

Does spending in one entity of a 13U structure count for the others?

Yes. From 1 January 2025, Annex 7 paragraph 3 applies the LBS condition at structure level “as though the structure is a standalone fund vehicle”. The test is the combined spending of the approved entities against the structure’s combined AUM in DI.

Can non-SFO funds use donations?

No. The circular provides the donation and grant route only for SFO funds; Tables A and B are met with LBS alone.

Sources

• MAS, FDD Cir 05/2026, “Tax Incentive Schemes for Funds”, 31 July 2026
• MAS, Fund Tax Schemes for Family Offices (last updated 22 September 2026)
• Charity Portal, Criteria for Application for Approval as an IPC
• Charities Act 1994 (Singapore Statutes Online)

Raffles Corporate Services helps family offices track and evidence 13O and 13U local spending, alongside VCC incorporation, family office set-up and ongoing compliance; our sister firm Singapore Secretary Services supports the accounting and corporate secretarial records behind the test. Email hello@rafflescorporateservices.com or Call/SMS/WhatsApp +65 8501 7133, or visit Raffles Corporate Services.

Last reviewed: 27 October 2026. The Editorial Team, Variable Capital Companies Act.