Introduction

The Financial Investor Scheme (“FIS”) was an investment programme that offered Singapore Permanent Residence (“SPR”) status to investors. This article explores what the FIS is, the eligibility criteria for investing in the scheme, the individuals who benefitted from the scheme, the events that led to the termination of the programme and considerations for FIS clients when seeking renewal of their Re-Entry Permits (“REP”).

What is the FIS?

The FIS was a programme spearheaded by the Monetary Authority of Singapore (“MAS”). It was a scheme to draw in foreign investors to Singapore by offering them SPR status if they satisfy the net worth and investment criteria. Launched almost 20 years ago, the FIS was started in 2004 alongside the Global Investor Programme (“GIP”) that is administered by the Economic Development Board (“EDB”). The two-pronged approach to acquire SPR status, regulated by two different governmental authorities, was the Singapore government’s plan to boost the economy by having foreign funds channeled into the Singapore financial market via local investments.

Eligibility Criteria of the FIS

The FIS was a relatively straightforward scheme in that investors were required to have a net personal asset of S$20 million and invest minimally S$5 million with an approved financial institution regulated by the MAS, for a period of five years starting from the date when the individual acquired SPR. The scheme was later revised to allow S$2 million of the S$5 million to be invested in selected real estate options. In 2010, the minimum total investment was increased to S$10 million.

Who Benefitted from the FIS

On the outset of the FIS criteria, one can surmise that the scheme was designed to attract high-net-worth individuals (“HNWIs”) to establish a more enduring connection with Singapore. Additionally, the SPR statuses that these HNWIs acquired via the FIS accorded them benefits for them and their families, such as the ability to work, live, enter and leave Singapore freely without the need for additional visas, enjoy tax benefits and ultimately, obtain the first step in their journey to acquire Singapore Citizenship, should this be desired at a later stage. Although exact figures are not available as to how many applicants were granted SPR status through the FIS.

The number of SPR approvals hit an all-time high in the three-year period from 2007 to 2009, with more than 200,000 SPR approvals granted during this period. The upward trend coincides with the introduction of the FIS (in addition to the GIP), which more than likely contributed to the unprecedented numbers within the last 20 years. The number of SPR approvals plummeted in 2010, and numbers have been kept consistent at around 30,000 per year since then.

The Demise of the FIS

The seemingly no-frills scheme might have ultimately contributed to its own untimely end. On 30 April 2012, the MAS pulled the plug on the FIS, ending the programme’s eight-year run. The heated property market, partly due to the rapid influx of high-net-worth foreigners snapping up local property, was likely a catalyst for its end. Reports indicate that property prices increased by over 60 percent from 2009 – 2014[1], causing interest rates to rise and making housing less affordable for residents. Just as how the most recent round of cooling measures saw a sharp increase of Additional Buyer’s Stamp Duty for foreign buyers of residential properties, scrapping the FIS programme in 2012 may have been part of a larger strategy by the government to cool the property market in the late 2000s.

What’s next for the FIS SPRs?

It has been almost 20 years since the FIS started. With the programme quietly shuttering more than a decade ago, those who obtained SPR via the FIS may be faced with some uncertainties as to their REP renewal. A REP allows a SPR to retain permanent residence status while traveling or remaining abroad. Unlike the GIP programme which provides specific conditions for renewal in the fifth year of obtaining SPR status, it is not so clear as to how the defunct FIS deals with REP renewals. As such, REP renewal is not as straightforward as it seems. Deliberate planning is still needed for a successful renewal, as the Immigration & Checkpoints Authority (“ICA”) would consider a myriad of factors when granting a renewal of the REP. Two main factors that the ICA would likely look at would be the length of residency and economic contributions. With the number of SPR approvals hovering at only 30,000 a year since 2010, having one’s REP renewed is not an automatic right and the ICA would consider whether the SPR individual has demonstrated any commitments to sinking roots in Singapore and if he/she is making any economic contributions.

Economic Contributions

One of the ways that FIS clients have succeeded in making significant economic contributions is by setting up a single family office (“SFO”) in Singapore. Many HNWIs have chosen Singapore as their preferred base for setting up their SFO, largely due to the country’s financial and political stability, robust infrastructure and its established position as a wealth management hub in Asia[2]. Under the purview of the MAS, one of the requirements of the SFO is to invest at least 10% (or S$10 million, whichever is lower) of the SFO’s Assets under Management (“AUM”) in local investments, aside from other conditions such as having minimum AUM, minimum annual business spending and minimum number of investment professionals employed in the SFO. With the various requirements and components that make up the SFO structure, the client contributes to the Singapore economy via substantial local investments, corporate tax on the net income of the SFO, personal income tax and CPF contributions by the investment professionals and other dealings with local banks, accounting and tax firms, and legal service providers by virtue of setting up the SFO in Singapore. In addition, the client enjoys tax exemptions for the fund company under the statutory tax incentive schemes administered by the MAS.

SFOs are also suitable platforms for wealthy families to give back to society through philanthropic activities. In the speech by Deputy Prime Minister and Minister for Finance Lawrence Wong at the Owners Symposium of the Global-Asia Family Office Summit on 29 September 2022, DPM Lawrence Wong said that the government is reviewing the tax incentive schemes to see how family offices can be encouraged to do more philanthropic giving, and to provide support to the local philanthropy ecosystem by channeling contributions through local charities and non-profit entities[3]. As such, the SFO regime is one that is supported by the government in its efforts to endow charitable foundations and establish Singapore as a global wealth management hub. Aside from setting up SFOs, FIS clients have also set up companies in Singapore with ongoing trading operations. Whether setting up a branch to expand their main business or establishing their headquarters in Singapore, setting up a business locally generates significant economic contributions to the Singapore economy as it creates job opportunities for residents, provides tax revenue and supports economic growth.

Therefore, for those who acquired their SPR statuses but have been largely absent from Singapore, it would be prudent to plan ahead and ensure that they have the necessary conditions in place before making an application for REP renewal. Although there have been successful cases of REP renewals for clients who have set up SFOs and/or businesses in Singapore, it ultimately bears reiterating that the ICA evaluates every REP renewal application holistically.

Conclusion

The FIS may have fizzled out quietly, but during its heyday, many HNWIs and their families can give credit to the scheme for helping them pave the way for their SPR and eventual Singapore citizenship. However, those who obtained their SPR statuses under the FIS would need to have a comprehensive plan in place when it comes to renewing their REPs, especially if they have not been residing in Singapore. One of the ways that has proven successful with some of the FIS clients is setting up SFOs and/or businesses in Singapore. As of now, the GIP programme is still in operation today and remains the only investment-driven government initiative that offers SPR to foreigners.

SMTP’s experience

As a private client firm, our Immigration and Family Offices department has a wealth of experience in navigating the GIP process to obtain SPR statuses and renew REPs for our high-net-worth clients and their family members, including any subsequent conversions to Singapore citizenship. Our firm has done successful REP renewals for FIS clients by setting up SFOs. Our lawyers work closely with clients and their advisors, adopting a tailored approach to address families’ specific needs and requirements.

Should you or your clients require any assistance or advice, please feel free to contact our Business Development Team to schedule a consultation.

 [1] https://www.cnbc.com/2014/04/15/singapores-property-market-in-a-standoff.html and https://www.reuters.com/article/singapore-property-idUSL4N0QS37V20140828

[2] https://www.channelnewsasia.com/singapore/family-offices-ultra-rich-set-singapore-financial-sector-3182131

[3] https://www.pmo.gov.sg/Newsroom/DPM-Wong-at-Global-Asia-Family-Office-Summit-Owners-Symposium