Singapore VCC insights

Family Office Compensation Singapore: Co-Investment, Phantom Plans and the 10% Limit

By VCC Editorial Team · Published 19 October 2026

Short answer: A Singapore single family office can pay salary, bonus, deferred cash, phantom awards and equity, but the licensing exemption in force since 15 June 2026 limits key employees to 10% of assets under management and a 10% stake. Variable pay does not count towards Employment Pass salary, and Singapore taxes all of it as employment income.

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.

For family office compensation, Singapore now applies four separate tests to any pay design. The SFO licensing exemption limits what key staff can invest and own. The section 13O and 13U fund tax incentives set pay and residence conditions for investment professionals. MOM looks only at fixed pay for work passes. The Income Tax Act 1947 decides when each element is taxed. Sources were checked on 19 October 2026, and in-force statements are as at that date.

What limits does the SFO exemption put on family office compensation in Singapore?

The exemption caps what key employees can invest through the SFO and how much of the SFO they can own. Each cap is 10%, and both apply only to a defined group of senior staff.

S 373/2026, made on 12 June 2026 and in operation from 15 June 2026, inserted paragraph 5(1)(ba) and sub-paragraphs (1AA) to (1AH) into the Second Schedule. Three provisions drive pay design:

• Under sub-paragraph (1AC), the SFO may carry on fund management only for family members, its key employees and “eligible entities”, whose assets must originate entirely from family members or key employees.
• Under sub-paragraph (1AD)(a), not more than 10% in value of the SFO’s assets under management may originate from its key employees. This is one aggregate cap, not a per-person allowance.
• Under sub-paragraph (1AB)(c), the total direct and indirect shareholding in the SFO of key employees who are not also family members must not exceed 10%.

An “investment professional” is an individual employed “to manage, research or deal in” products forming part of the SFO’s assets under management. A general counsel or head of operations who is not an executive director is therefore not a key employee, and the SFO cannot manage even a small amount of their money. The MAS FAQs on the licensing exemption framework describe key employees as “allowed to own a non-controlling stake of up to 10%”. SFOs exempt under the old paragraph 5(1)(b) keep the old law until the earlier of 15 June 2027 or filing a notice of continuation; our guide to the 15 June 2027 transition covers the filing, and a compensation review belongs in the same workstream.

Can key employees co-invest alongside the family?

Yes, if the co-investor is a key employee and all key-employee money together stays within 10% of assets under management. Co-investment by other staff cannot run through the SFO’s exempt fund management.

Under sub-paragraph (1AH)(a), assets “originate” from an individual if the register of members, trust deed or other records attribute them to that individual, and “assets” includes contributed share capital. An employee’s subscription into a family variable capital company (VCC) or holding company therefore counts. Our reading of the text gives four design points:

• Headroom is shared. If the chief investment officer uses most of the 10%, little remains for later hires, so many families allocate a lower internal limit per role.
• The ratio moves with values. A family withdrawal or a fall in portfolio value can push key-employee assets above 10% without any new subscription, so test it at each valuation date.
• Departures have a clock. A former key employee stays within the definition for one year; after that, their money is no longer money the SFO may manage, so leaver terms should redeem or transfer the interest within that year.
• Employee vehicles. An eligible entity’s beneficiaries must be family members, key employees, charitable organisations or other eligible entities. An employee’s holding company may fit; a trust that also benefits the employee’s spouse or children may not.

Our note on family co-investment routes beside a VCC covers the vehicle options.

How should phantom and cash-settled plans be structured?

A phantom plan pays cash measured by a reference portfolio or notional shares, with no actual interest. In our view it uses neither 10% limit, which makes it the most flexible upside tool for most SFOs.

An unfunded phantom award is a contractual claim against the employer, not a managed asset or a shareholding. To keep it that way, do not pre-fund the award in a segregated account managed for the employee, and do not allow conversion into shares or fund units.

For tax, IRAS states that employee share ownership (ESOW) plans “do not include plans where an employee receives cash payments that are linked to the price of shares in a company, but there is no possibility (under the plan) for the employee to receive shares in the company (commonly referred to as phantom share plans)”. Section 10(6) therefore does not set the tax point. In our view the payment is a bonus or other gain from employment under section 10(2)(a), which covers amounts “paid or granted in respect of the employment whether in money or otherwise”.

Timing then follows IRAS bonus guidance. IRAS treats a “deferred bonus plan” or “retention bonus plan” as a contractual bonus, and where payment depends on future conditions the employee “will only become entitled to the bonus when these conditions are met”. A three-year cliff is therefore normally taxed when the cliff is passed.

What happens if the family gives executives real shares in the family office?

Real equity is possible within the 10% cap on non-family key employees’ holdings, measured through every ownership layer under sub-paragraph (1AH)(c). It is usually a share of a cost centre, not of the family portfolio. Gains are employment income, taxed on exercise or vesting or when a sale restriction ends.

Section 10(6) of the Income Tax Act 1947 deems gains from a right to acquire shares obtained by reason of employment to be income under section 10(1)(b), measured as open market price less the amount paid. Where no market price exists, as with an SFO’s shares, section 10(6)(c) lets the Comptroller use net asset value. The IRAS guidance on gains from stock options says share award gains are generally taxable “when the shares vest for the employee”.

For employees who are neither citizens nor permanent residents (or are permanent residents leaving permanently), section 10(7) deems unexercised or unvested awards to give rise to income on leaving the employment, valued one month before cessation. Sections 10(7AA) to 10(7AC), in force from 8 December 2025, let the person apply within five years for a revised assessment if the actual gain is lower or the award lapses or is forfeited. IRAS’s Qualified Employee Equity-based Remuneration Scheme allows tax on these gains to be deferred for up to five years, with interest.

Can a family office pay carried interest or a profit share?

An SFO can contract to pay a share of portfolio profits today, and Singapore taxes it as remuneration if the recipient is an employee. Whether the proposed exemption for profit-related returns will reach family office arrangements is unknown.

On 19 August 2026, MAS and the Ministry of Finance announced a planned exemption for “profit-related returns arising from the provision of fund management services to qualifying funds”, expected from YA 2027 with details at Budget 2027. It covers cases 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 said it “does not apply to ordinary salaries, bonuses or other forms of employee remuneration”, and described qualifying funds as those exempt under sections 13D, 13O, 13OA, 13U and 13V and managed by Singapore-based fund managers.

As at 19 October 2026 this is a proposal, not law. MAS has not said whether a family’s 13O or 13U vehicle paying a profit share to its own SFO staff is a “commercial fund arrangement”. Our analysis of the carried interest tax exemption tracks what is known. Until Budget 2027, assume a profit share paid to an employee is taxable employment income.

How do the 13O and 13U investment professional conditions shape pay?

A qualifying investment professional must earn more than S$3,500 a month, spend more than 50% of their time on qualifying activity and remain a Singapore tax resident.

The MAS page on fund tax schemes for family offices requires 2 qualifying investment professionals for 13O or 13OA and 3 for 13U, in each case at least 1 not a family member, alongside S$20 million (13O/13OA) or S$50 million (13U) in Designated Investments. Qualifying professionals “must be employed as a portfolio manager, research analyst or trader” and “must be Singapore tax residents throughout the incentive period”.

This differs from the licensing definition. A chief financial officer is a key employee for the SFO exemption but not a qualifying investment professional for 13O, so compensation papers should record which test each role serves. Our guide to hiring investment professionals on an Employment Pass covers the hiring sequence.

How do the Employment Pass and COMPASS treat a variable pay package?

MOM assesses an Employment Pass (EP) on fixed monthly salary only. A package weighted to bonus, phantom units or equity can miss the qualifying salary or score poorly under COMPASS (the Complementarity Assessment Framework), whatever its total value.

MOM defines fixed monthly salary as basic monthly salary plus fixed monthly allowances, excluding “overtime payment, bonus, commission or annual wage supplements”, “fees from sitting on the Board, or stock options or dividends” and productivity incentive payments. For financial services the EP qualifying salary is S$6,200, rising progressively with age to S$11,800 at 45 and above. For new applications from 1 January 2027, and renewals of passes expiring from 1 January 2028, it becomes S$6,600 to S$12,700. An application needs 40 COMPASS points; the salary criterion benchmarks fixed monthly salary against local professional, manager, executive and technician (PMET) salaries in the sector, and a fixed monthly salary of at least S$22,500 exempts the candidate from COMPASS.

Shifting pay into a phantom plan improves alignment but lowers the figure MOM sees. MAS has said the planned Overseas Networks and Expertise (ONE) Pass Investment Management Track “may include refining the assessment of salaries” to recognise “returns linked to investment performance and fund outcomes”, which is a statement of intent, not current practice. See our ONE Pass guide; our sister firm Singapore Employment Agency handles pass applications.

How is each pay element taxed and tested?

Everything paid to an employee is employment income; only the timing and the regulatory effect differ.

Element	SFO exemption (paragraph 5(1)(ba))	EP and COMPASS	When Singapore taxes it
Base salary and fixed allowances	No effect	Counts as fixed monthly salary	As earned (s 10(2)(a))
Discretionary annual bonus	No effect	Excluded	Generally when paid (IRAS, non-contractual bonus)
Deferred or phantom cash award	No effect if unfunded and never convertible (our reading)	Excluded	When the employee becomes entitled, usually on vesting
Co-investment in SFO-managed vehicles	Key employees only, within the 10% aggregate assets limit	Not salary	Returns follow ordinary rules; any discount needs separate analysis
Shares or options in the SFO	Non-family key employees capped at 10%, direct and indirect	Excluded	Exercise, vesting or end of sale restriction (s 10(6)); deemed exercise on leaving for non-citizens (s 10(7))
Profit share from a family fund	Depends on how it is held; check both limits	Excluded	Employment income; proposed YA 2027 exemption excludes employee remuneration

Resident individuals pay progressive rates up to 24% on chargeable income above S$1 million from YA 2024. A non-resident’s employment income is taxed at a flat 15% or at resident rates, whichever gives more tax.

What process should a family follow when designing the package?

Map the rules, then the people, then the instruments, because both 10% limits are shared and pass timing depends on fixed pay. Remember that paragraph 5(6)(d) also requires an employee ordinarily resident in Singapore as the point of contact with MAS.

1. Mark each role as a key employee under sub-paragraph (1AE), a 13O or 13U investment professional, a work pass holder, or several of these.
2. Calculate headroom under both 10% limits, tracing shareholdings through every ownership layer.
3. Set fixed monthly salary first, high enough for the EP qualifying salary and COMPASS for each foreign hire.
4. Add variable pay in order of regulatory cost: cash bonus and phantom awards, then co-investment within an allocated part of the 10% assets limit, then real equity.
5. Draft vesting, forfeiture, leaver and valuation terms that fix the tax point and take former key employees out of SFO-managed vehicles within one year.
6. Minute the design and build both 10% tests into each valuation cycle and the annual return to MAS.

Frequently asked questions

Can a family office in Singapore manage money for its head of operations?

Not under the SFO class exemption, unless that person is also a key employee. Other staff can be rewarded through cash or phantom awards instead.

Does the 10% limit apply to each employee separately?

No. Sub-paragraph (1AD)(a) caps assets from all key employees together at 10% of assets under management. A separate 10% cap applies to non-family key employees’ combined shareholding in the SFO.

Do bonuses help an Employment Pass application?

No. MOM excludes bonuses, commission, stock options, dividends and board fees from fixed monthly salary, which drives both the EP qualifying salary and the COMPASS salary criterion.

Is a phantom share award taxed when it is granted?

Normally not. IRAS places phantom share plans outside the ESOW rules, and a cash award subject to future conditions is generally taxable when the employee becomes entitled to it.

Sources

• Securities and Futures (Licensing and Conduct of Business) (Amendment) Regulations 2026, S 373/2026
• MAS media release, 19 August 2026
• MAS, Fund Tax Schemes for Family Offices
• IRAS, Salary, bonus, director’s fee, commission and others
• MOM, Eligibility for Employment Pass

Raffles Corporate Services helps family offices put executive pay structures in place, including the entities, registers and filings that keep the 10% limits auditable, alongside VCC incorporation, family office set-up and ongoing compliance. Email hello@rafflescorporateservices.com or Call/SMS/WhatsApp +65 8501 7133, or visit Raffles Corporate Services.

Last reviewed: 19 October 2026. The Editorial Team, Variable Capital Companies Act.