Here is an outline of important recent legal, tax and regulatory developments affecting wealth managers doing business with or in Singapore.

Here is another update on important legal, regulatory and tax developments in Asia-Pacific jurisdictions, and this comes from Baker McKenzie (a previous report, about Malaysia, can be seen here). 
Authors of this report are Dawn Quek, principal, and Enoch Wan, senior associate. They are at Baker McKenzie Wong & Leow, member firm of Baker McKenzie in Singapore. The editors are pleased to share these insights with readers and invite responses. The usual editorial disclaimers apply. To comment, email tom.burroughes@wealthbriefing.com and jackie.bennion@clearviewpublishing.com

Updated COVID-19 administrative guidance on tax residency for individuals and companies
The COVID-19 pandemic has continued to disrupt cross-border movements. The Inland Revenue Authority of Singapore (IRAS) published administrative guidance with respect to the determination of tax residency in April 2020. To provide continued clarity during the ongoing pandemic, the IRAS updated its guidance on 29 January 2021.

Tax residency status of individuals working remotely from Singapore
(a) Singaporeans or Singapore permanent residents exercising overseas employment and currently working remotely from Singapore.
If an individual has been working remotely from Singapore for their overseas employer since 2020 because of COVID-19, the IRAS will continue to treat such individuals as not exercising employment in Singapore from the date of their return to Singapore, until the date they left Singapore in 2020, if the individual did not stay in Singapore beyond 31 December 2020, and the following conditions are met: 
i.    there is no change in the contractual terms governing the employment overseas before and after the individual's return to Singapore; and
ii.    this is a temporary work arrangement due to COVID-19.

Where these conditions are met, the employment income earned during the period of the individual's stay in Singapore in 2020 will not be taxable in Singapore. 

If the individual's stay in Singapore extended into 2021, the individual must satisfy the following conditions, in addition to those above, for their employment income earned during the period of their stay up to 30 June 2021 not to be taxable in Singapore:
i.    the work performed by the individual in Singapore would have been performed overseas if not for COVID-19;
ii.    the individual will leave Singapore as soon as possible before 30 June 2021;
iii.    the employment income earned during the period 1 January 2021 to 30 June 2021 is subject to tax in the jurisdiction of the overseas employer.

(b) Non-resident foreigners exercising overseas employment who are on a short-term business assignment in Singapore and are unable to leave Singapore due to COVID-19.
Such individuals may also be working remotely from Singapore for their overseas employers during this extended stay in Singapore. 

The IRAS will continue to treat individuals working remotely from Singapore for their overseas employer, and who cannot leave due to COVID-19, as not exercising employment in Singapore during their period of extended stay in 2020, where the following conditions are met:
i.    the period of the extended stay is not more than 60 days; and
ii.    the work done during the extended stay is not connected to the initial business assignment leading to the travel to Singapore and would have been performed overseas but for COVID-19.

Where these conditions are met, the employment income for this period of extended stay in 2020 will not be taxable.

Tax residency status of companies 
Under the ITA, for a company to be resident in Singapore, the control and management of its business have to be exercised in Singapore. Thus, the location of the physical board meetings of a company's directors is generally a key consideration in the determination of the company's tax residency.

The IRAS has continued to apply special rules with respect to determining the tax residency of companies due to the continued disruption to travel. 

The IRAS will consider a company as a Singapore tax resident for the years of assessment (YAs) 2021 and 2022, notwithstanding the fact that board meetings are not held in Singapore due to the travel restrictions, if:  
i.     the company is a Singapore tax resident for the immediate preceding YA;
ii.    there are no other changes to the economic circumstances (e.g., principal activities, nature of business operations, usual locations in which the company operates) of the company; and
iii.    the directors are obliged to attend board meeting(s) held outside Singapore or participate electronically (via video conference) due to their movement being restricted by COVID-19 related travel restrictions.

The IRAS will continue to consider a company as a non-resident for YAs 2021 or 2022 if (i) the company is not a Singapore tax resident for the immediate preceding YA, (ii) the company is obliged to hold its board meeting(s) in Singapore due to the travel restrictions in place; and (iii) there are no other changes to the economic circumstances of the company.

Whether a company claims to be a Singapore tax resident or otherwise, the IRAS expects the company to maintain relevant records and to provide the same to the IRAS when requested. Examples include board minutes stating the reasons why directors are attending the board meeting in their respective locations at the time.

Permanent establishment issues
The IRAS has clarified that, if employees of a foreign company are obliged to stay in Singapore due to COVID-19 travel restrictions, the foreign company will not be treated as having a permanent establishment (PE) in Singapore for YAs 2021 or 2022 due to the presence of such employees if:
i.    the foreign company does not have a PE in Singapore in the immediate preceding YA;
ii.    there are no other changes to the economic circumstances (e.g., principal activities, nature of business operations, usual locations in which the company operates) of the foreign company;
iii.    the physical presence of the employees in Singapore up to 30 June 2021 is temporary, and arises due to COVID-19 travel restrictions; and
iv.    the employees' activities in Singapore would have been performed overseas if not for the travel restrictions.

IRAS has further indicated that, for the purposes of interpreting the provisions of Singapore's Avoidance of Double Taxation Agreements in light of the COVID-19 pandemic, the guidance published by the OECD with respect to the impact of COVID-19 on tax treaties should be used.

Goods and services tax
Proposed increase to GST to be implemented during 2022 to 2025
The Singapore Government first announced an intention to increase the rate of goods and services tax (GST) between 2021 and 2025 in the 2018 Budget.

In the 2021 Budget speech, the Singapore Government announced that, whilst the increase would not be implemented during 2021, the rate would be raised during 2022 to 2025 to meet financial needs, particularly increased healthcare spending due to COVID-19.

With respect to the wealth management industry, we do not expect significant impact from this projected increase. Most family offices in Singapore are able to take advantage of an existing GST remission scheme for Singapore-managed funds, which allows such vehicles a remission of a large portion of their input GST. The remission rate, which is set by the Monetary Authority of Singapore annually, has hovered between 87 per cent to 90 per cent in recent years and the remission scheme itself is currently extended until 31 December 2024. The remission scheme is tied to tax incentive schemes such as the Enhanced Tier Fund incentive, which we expect will play a pivotal role in the Singapore wealth management industry in years to come. As such, we expect both these types of tax incentives, and the GST remission scheme to continue to be extended as part of the Singapore Government's continued support for Singapore acting as a hub for family offices and high net worth families.

Trust case − retirement of trustees
Chan Yun Cheong v Chan Chi Cheong [2021] SGCA 33
This case concerned a trust arising out of a will, with three trustees, all being the grandchildren of the testator. Two of the trustees purported to resign from their respective roles as trustee. Trustee 1 sought to do so pursuant to the conditions set out in section 40 of the Trustees Act, which requires retirement by way of deed and the consent of the other trustees, also obtained by deed. 

Trustee 1 prepared a draft deed for his own retirement and sent it to Trustee 2 and Trustee 3. Trustee 2 gave his consent to the draft deed but Trustee 3 did not. Instead, Trustee 3 sought to retire from his own trusteeship role by way of a letter of resignation, relying on clause 3 of the will which provided for such method of resignation. In addition, Trustee 3 referred to the example of a previous trustee of the same will who had also retired by letter. The previous trustee subsequently also executed a deed to confirm his retirement, which was circulated to the other trustees for signature.

Upon Trustee 3's refusal to sign, Trustee 1 sought a court order for Trustee 3 to sign Trustee 1's deed of retirement as well as the previous trustee's deed of confirmation. The High Court initially granted the order, holding that the conditions of section 40 of the Trustees Act must be met notwithstanding the requirements of the express provision for retirement in the trust instrument. Additionally, the High Court held that a trustee cannot unreasonably withhold consent to a co-trustee's retirement, and that in this case, Trustee 3 had withheld his consent unreasonably.

The Court of Appeal reversed the decision. The decision was based on the Court of Appeal's findings on the application of the Supreme Court of Judicature Act and the Rules or Court, but in its judgement the Court of Appeal also observed that the statutory power of retirement under section 40 of the Trustees Act was separate and independent from any express stipulation under a trust instrument. Section 2(2) of the Trustees Act is clear that the statutory power of retirement under section 40 is an alternative to the express powers conferred by the relevant trust instrument, and section 40 applies only if a contrary intention is not expressed in the trust instrument. The only trustee retirement condition that is statutorily required is under section 38(1)(c) of the Trustees Act, being that a trustee may only retire if there is a trust corporation or at least 2 individuals left to perform the trust (except in cases in which only one trustee was originally appointed).

In this case, the Court of Appeal felt it was clear from clause 3 of the will that the intention of the testator was for a trustee to be able to retire only after finding a replacement (who was a male descendant of the testator), and if the other trustees appointed the replacement trustee in writing.

Therefore, whilst the Court of Appeal allowed Trustee 3's appeal and found that Trustee 3 could not be compelled to sign the various deeds, it also found that both Trustee 1's and Trustee 3's purported retirements were not valid as neither had found a replacement who was then appointed in writing as a replacement trustee by the other continuing trustees. 

However, the Court of Appeal found that the previous trustee, who had also not found a replacement, did retire validly, as all the other trustees had administered the trust and acted as if he had validly retired and was discharged as a trustee, including making trustee decisions without him.

The main takeaway from this case is that, whilst it is clear that express provisions in the trust instrument will take precedence, it is all the more vital that the express provisions of the trust instrument for trustee retirement are comprehensive and clearly drafted.

Report on the Enactment of Non-Charitable Purpose Trusts
Report from the Law Reform Committee of the Singapore Academy of Law
In May 2021, the Law Reform Committee of the Singapore Academy of Law published its report on making statutory provision for the creation of Non-Charitable Purpose Trusts (NCPTs) in Singapore.

The committee recommended the creation of a statutory NCPT under Singapore law, after having examined the position in other jurisdictions and the arguments for and against NCPTs and not having found any consensus. Non-tax needs and demands, for both family businesses and other structures of a more corporate nature, were found to be increasingly driving the demand for such a vehicle.

From the family business perspective, an NCPT would be useful for preventing asset fragmentation amongst family members and for ring-fencing assets, both of which are very relevant considerations for family office structures and succession planning. The NCPT is also a viable vehicle to accommodate purposes both business and philanthropic in nature. 

The committee also felt that NCPTs would be a useful tool for broader commercial application, citing examples such as using NCPTs to hold risky assets for investment in asset securitisation, or to hold investment funds with leveraged borrowing, or to acquire shares for exercising voting control. These can also be relevant in the family business context.

Social and philanthropic purposes are another area where the committee thought that the NCPT would be relevant. In particular, certain social purposes which are not exclusively charitable are nonetheless beneficial and vital in some cases. NCPTs would address the lack of suitable vehicles for such purposes and provide a better solution than the currently available options of a for-profit company (with its relatively rigid corporate governance aimed at enhancing shareholder return) and a sole proprietorship (which is not sufficiently transparent nor equipped with safeguards to ensure accountability). The NCPT would also be an excellent fit for philanthropic non-charitable trusts, which currently fail as charitable trusts due to not being exclusively charitable.

Of particular interest is the committee's view that, in Singapore at least, the policy focus has shifted from scrutiny of tax avoidance and money laundering to one of support for confidentiality and freedom of dispositive intention. The freedom to make disposition of one's property was, in the committee's eyes, "preeminent" and further, the freedom to "utilise capital in commerce and to limit liability for trading debts to that capital" was considered "essential to the economic life of [a] community".

The committee suggested that a NCPT should have the following attributes:
i.    be sufficiently certain for the trust to be formed and administered;
ii.    not be contrary to public policy;
iii.    related to any of the one or a mix of the following purposes:
a)    public;
b)    social;
c)    religious;
d)    philanthropic;
e)    investment and management of assets; or
f)    other business.

Additionally the NCPT would need to:
i.     be governed by Singapore law;
ii.    appoint a licensed trust company (or a registered private trust company) as trustee;
iii.   have an enforcer who bears certain fiduciary duties;
iv.   carry out at least part of its purpose(s) in Singapore;
v.    hold at least part of its assets in Singapore; and
vi.   with respect to public, religious, social and philanthropic trusts, substantially carry out the relevant purposes in Singapore.

With respect to settlor powers, the committee recommended that the settlor should specify the purposes for which the trust assets are to be applied but should not hold any control over the NCPT's assets (e.g., no power to replace the trustee, amend the purposes, etc.).