Singapore VCC insights

Carried Interest Tax Exemption Singapore: What Is Known Before Budget 2027

By VCC Editorial Team · Published 18 October 2026

Short answer: On 19 August 2026 MAS and the Ministry of Finance announced a planned tax exemption for profit-related returns, the share of fund profits paid to managers for fund management services, for funds under sections 13D, 13O, 13OA, 13U and 13V. It is expected from YA 2027, but nothing is legislated yet. Details come at Budget 2027.

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 carried interest tax exemption Singapore announced in August 2026 is the most significant change to manager economics in years, and it is also one of the least defined. MAS has never used the phrase “carried interest” in its release; its term is “profit-related returns”, and the label you use matters less than the conditions that Budget 2027 will set. This article separates what has been said from what remains open, explains the current tax treatment of carry and performance fees, and sets out steps to take now. All sources were checked on 18 October 2026, and statements about what is in force are as at that date.

What exactly did MAS announce on 19 August 2026?

MAS announced a package of three measures, the first of which is a planned tax exemption for profit-related returns from fund management services to qualifying funds. The exemption is a policy announcement, not law: MAS describes it as planned and expected to take effect, with the detail left to Budget 2027.

The MAS media release of 19 August 2026 lists three measures:

• a tax exemption for profit-related returns from the provision of fund management services to qualifying funds;
• a new Hedge Fund Investment Programme, under which MAS will invest with hedge fund managers committed to establishing or deepening their presence in Singapore; and
• a new Investment Management Track under the Overseas Networks & Expertise (ONE) Pass framework.

On the tax measure, MAS says the exemption “will apply to qualifying profit-related returns that are received through commercial fund arrangements”, specifically where a share of a qualifying fund’s profits is contractually received by corporate entities, partnerships or individuals, directly or indirectly, for the provision of fund management services. MAS adds that the exemption “will take into account prevailing commercial fund management arrangements”.

The release frames the measure as targeted. It notes that qualifying funds are already required to meet economic substance requirements, including minimum headcount. MAS puts the industry at almost S$7 trillion; our note on the Singapore Asset Management Survey 2025 covers the wider figures.

Which funds qualify for the carried interest tax exemption in Singapore?

MAS defines qualifying funds as funds that qualify for tax exemption under sections 13D, 13O, 13OA, 13U and 13V of the Income Tax Act 1947 and are managed by Singapore-based fund managers. A manager whose fund sits outside these five regimes should assume, on current information, that its carry would not be covered.

Section of the Income Tax Act 1947	What the section covers (per the statute)	Typical use
13D	Income of prescribed persons arising from funds managed by a fund manager in Singapore	Funds, including offshore funds, managed by a Singapore fund manager
13O	Approved company to which the section 13O exemption applies	Singapore company or VCC funds, including many single family office vehicles
13OA	Income of partners of an approved limited partnership registered under the Limited Partnerships Act 2008, arising from funds managed in Singapore	Singapore limited partnership funds
13U	Approved person, including master-feeder and special purpose vehicle structures	Larger funds, including larger family office vehicles
13V	Certain income of prescribed sovereign fund entities, approved foreign government-owned entities and international organisations	Sovereign and government-owned fund mandates

Two points follow. First, the link to a qualifying fund means the fund’s own incentive status becomes part of the manager’s tax position. A fund that loses its 13O or 13U status, or never obtains it, may take the manager’s carry exemption with it. Second, MAS ties the definition to funds “managed by Singapore-based fund managers”. Whether that requires a licensed manager, a manager exempt from licensing, or simply Singapore-based activity is one of the open questions. Our guides to the fund management licence and the remaining licensing exemptions set out the manager-side options.

What is announced, and what is still unknown?

The headline scope, start date and eligible fund types are announced. The definition, conditions, caps, holding periods and anti-avoidance rules are not.

Point	Status as at 18 October 2026	Source
Exemption for profit-related returns from fund management services	Announced; not legislated	MAS release, 19 August 2026
Start date	“Expected” from YA 2027 (2026 basis period)	MAS release; MAS speech, 29 September 2026
Recipients	Corporate entities, partnerships or individuals, directly or indirectly	MAS release
Eligible funds	13D, 13O, 13OA, 13U, 13V funds managed by Singapore-based managers	MAS release, footnote
Excluded	Ordinary salaries, bonuses, other employee remuneration	MAS release, footnote
Definition of “profit-related returns”	Not published	To come at Budget 2027
Hurdle, holding period or vesting conditions	Not published	To come at Budget 2027
Any cap, or substance test at manager level	Not published	To come at Budget 2027
Treatment of co-investment and management fees	Not addressed	None
Position of single family offices	Not addressed	None

The basis-period point deserves attention. In his keynote speech of 29 September 2026, MAS Deputy Chairman Chee Hong Tat said the exemption is expected to take effect from YA 2027 “covering income earned in the 2026 basis period”, which he described as calendar year 2026 for individuals and financial years ending in 2026 for corporates. If that holds, carry crystallising in 2026 could fall within scope, even though the conditions will only be published in 2027. Files built now will be the evidence later.

How are carried interest and performance fees taxed in Singapore today?

Under current law there is no specific carried interest rule: the answer depends on who receives the amount and in what capacity. Employees are taxed on employment income, self-employed individuals and partners on trade or business income, and companies at 17% unless an incentive applies.

Section 10(1) of the Income Tax Act 1947 charges tax on, among other things, “gains or profits from any trade, business, profession or vocation” and “gains or profits from any employment”. Section 10(2)(a) defines employment gains widely to include any “wages, salary, leave pay, fee, commission, bonus, gratuity, perquisite or allowance” paid or granted in respect of the employment. IRAS states that all income derived as an employee “are taxable unless specifically exempted under the Income Tax Act or covered by an existing administrative concession”. An investment professional who receives a performance-linked payment through payroll is therefore taxed on it as employment income.

Rates for individuals are set out on the IRAS page on individual income tax rates. Resident rates are progressive, with the top rate of 24% on chargeable income above S$1 million from YA 2024. Employment income of a non-resident is taxed at a flat 15% or at resident progressive rates, whichever gives the higher tax. Most other income of non-resident individuals is taxed at 24%.

For companies, IRAS confirms the flat 17% corporate rate. A manager approved as a Financial Sector Incentive (Fund Management) company under section 43J of the Act is taxed at 10% on income from “managing the funds of a specified person” and from investment advisory services to such a person, under regulation 7 of the Income Tax (Concessionary Rate of Tax for Financial Sector Incentive Companies) Regulations 2017. “Specified person” covers 13D prescribed persons, 13O approved companies and 13U approved persons and structures. Each approval period is five years, and regulation 4(7) provides that no approval or extension may be given on or after 1 January 2029.

So the announced exemption matters most in two places: carry received by individuals, which today can attract up to 24%, and carry received by the manager entity or a carry vehicle that has no incentive, which today pays 17%. How the new exemption will interact with the 10% concessionary rate is not yet known. For performance fees at fund level, our note on validating performance fees by VCC share class covers the operational side.

Does the exemption reach single family offices and their key employees?

MAS has not said. The release and speech speak of commercial fund arrangements and of returns paid for fund management services, which describes third-party managers more naturally than a family managing its own wealth.

Many single family office (SFO) vehicles hold a 13O or 13U award, so they are qualifying funds on the face of the footnote. But the exemption attaches to returns “received through commercial fund arrangements”, and MAS states that it does not extend to “ordinary salaries, bonuses or other forms of employee remuneration”. SFO investment professionals are usually salaried employees of the family office company, and a discretionary bonus linked to portfolio results would, on that wording, remain taxable as employment income. Whether an SFO could adopt a contractual profit share for its key non-family investment staff, and whether that would be accepted as a commercial fund arrangement, is a question only the Budget 2027 detail can answer. We would not restructure SFO pay on the strength of the announcement alone.

How does the ONE Pass Investment Management Track fit in?

It addresses the immigration side of the same compensation problem: variable pay. From late January 2027, MAS and the Ministry of Manpower (MOM) will let applicants meet the ONE Pass qualifying salary of S$30,000 through a combination of a minimum fixed monthly salary of S$15,000 and variable compensation.

The speech of 29 September 2026 adds that applicants must meet the qualifying salary criteria for the past three years to show earning consistency. MAS’s August release had said the track may recognise “returns linked to investment performance and fund outcomes”. The two measures are separate: qualifying for the pass on variable pay says nothing about whether that pay is tax-exempt. Our earlier analysis of the ONE Pass for family office principals covers the existing criteria, and our sister site Singapore Employment Agency handles pass applications.

How does Singapore’s carried interest position compare with Hong Kong’s?

Hong Kong already has a preferential tax regime for carried interest under its Inland Revenue Ordinance, which a 2026 Bill would enhance; Singapore has an announcement. That difference in legal certainty will narrow only when Singapore publishes its rules.

The Hong Kong Government gazetted the Inland Revenue (Amendment) (Preferential Tax Regimes for Funds, Family-owned Investment Holding Vehicles and Carried Interest) Bill 2026 on 12 June 2026, which, according to the Inland Revenue Department’s press release, introduces “a series of enhancement measures to the tax regime for carried interest”. We have not confirmed its enactment as at 18 October 2026. Carry is only one factor in a manager’s choice between the two cities; licensing, talent and fund vehicles are covered in our separate piece on where a relocating Asia fund manager should base itself. For the family office comparison, see our analysis of Hong Kong FIHV against Singapore 13O and 13U.

What should fund managers and family offices do before Budget 2027?

Prepare evidence and keep options open; do not restructure on assumptions. The steps below are useful whatever the final rules say.

1. Map every profit-share arrangement: who receives it (individual, partnership, company), under which document, from which fund, and in which basis period it crystallises.
2. Confirm each fund’s incentive status under section 13D, 13O, 13OA, 13U or 13V, and diarise the annual conditions so that status is not lost during 2026 or 2027.
3. Put carry on a contractual footing. MAS refers to profits “contractually received”; discretionary bonuses described as carry are unlikely to fit.
4. Separate carry from salary and bonus in payroll and board records, given the express exclusion of employee remuneration.
5. Document where the investment decisions behind each fund are made and by whom, since the measure is aimed at Singapore-based management.
6. Review any Financial Sector Incentive (Fund Management) award and its expiry, bearing in mind the 1 January 2029 cut-off for new approvals or extensions.
7. For SFOs, hold off on new profit-share plans for staff until the Budget 2027 detail confirms whether such arrangements qualify.
8. Diarise Budget 2027 and the follow-up IRAS guidance, and plan a review of carry documents within weeks of publication.

Frequently asked questions

Is the carried interest tax exemption in force?

No. As at 18 October 2026 it is an announced policy. MAS says it is expected to take effect from YA 2027 and that further details will be announced at Budget 2027. It will need legislation before it applies.

Does the exemption cover management fees?

MAS describes the exemption as covering a share of a qualifying fund’s profits received for fund management services. It has not said that fixed management fees are covered, and nothing in the release suggests they are.

Could carry I receive in 2026 be exempt?

Possibly. MAS’s Deputy Chairman said on 29 September 2026 that the exemption is expected to cover income earned in the 2026 basis period, meaning calendar year 2026 for individuals. The conditions are still unknown, so keep full records.

Does a fund outside Singapore’s incentive schemes qualify?

On current information, no. MAS defines qualifying funds as those exempt under sections 13D, 13O, 13OA, 13U and 13V of the Income Tax Act 1947 and managed by Singapore-based fund managers.

Will the exemption apply to a bonus linked to fund performance?

MAS states that the exemption does not apply to ordinary salaries, bonuses or other forms of employee remuneration. A performance bonus paid through payroll is taxable employment income today and appears to remain outside the measure.

Sources

• MAS media release, 19 August 2026: MAS Introduces Measures to Strengthen Singapore’s Competitiveness as a Leading Asset Management Hub
• MAS speech, 29 September 2026: Keynote by Mr Chee Hong Tat at SuperReturn Asia
• Income Tax (Concessionary Rate of Tax for Financial Sector Incentive Companies) Regulations 2017
• IRAS: Individual Income Tax rates
• IRAS: Employment income (salary, bonus, director’s fee, commission and others)

Raffles Corporate Services helps fund managers and family offices with VCC incorporation, family office set-up and ongoing compliance, including preparing fund and manager structures for the Budget 2027 carry rules. Email hello@rafflescorporateservices.com or Call/SMS/WhatsApp +65 8501 7133, or visit Raffles Corporate Services.

Last reviewed: 18 October 2026. The Editorial Team, Variable Capital Companies Act.