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ACCOUNTING

VCCs: More reasons to domicile a fund in Singapore

August 2021

Andrew Macintosh

Singapore has a reputation for being a good place to domicile funds, and it just keeps getting better. Especially with Singapore’s new Variable Capital Company (VCC) bill. Read on for the tax regulations that make this island nation so attractive to VCs and private funds.

In general, international funds are domiciled in countries with favorable taxation policies. The Cayman Islands are popular for this reason. In Asia, investors typically look to Hong Kong or Singapore as a base for their funds. But, with Hong Kong going through a period of political uncertainty, Singapore is coming out ahead as a clear leader.

In recent years, there are more government initiatives to aggressively counter tax reduction strategies — often denigrated by the mainstream press as a form of tax evasion — that utilize offshore tax-havens. Yet, Singapore is bucking the trend with new regulatory changes. The Singapore Variable Capital Company (VCC) Bill has passed in Singapore’s parliament and will be fully in place by early 2020. When complete, it will be even easier for funds to domicile in Singapore.

Corporate entities for investment funds typically use company, limited partnership, or unit trust structures. Each has their merits and weaknesses. The VCC is a new entity class for investment funds, with relaxed capital rules that favour the fund management industry. It can be used by both open-ended and closed-ended investment funds. Due to its variable capital structure, it allows for an easier flow of capital back to investors. It can also be a standalone structure, or have sub-funds under an umbrella fund.

As a standalone structure, the VCC will receive the same tax treatment of a traditional Singapore company – including existing tax incentive schemes.The main requirements for setting up a VCC in Singapore are:

  • Fund managers need to be registered, licensed, or exempted by MAS

  • The entity must have a Singapore registered office

  • The entity must have a company secretary

  • The entity must have a Singaporean director or nominee director

  • The entity must undergo annual audits by a licensed, Singapore-based auditor

With Singapore’s favourable tax treatment, its progressive business landscape, and now the introduction of the VCC entity structure, there has never been a better time to set up an entity or fund in Singapore. There are many intricacies to the new VCC structure, but Lanturn is well-equipped to help set up and maintain your fund. Do get in touch if you’d like to know more.

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