Singapore drives innovation in asset management industry with launch of the new Variable Capital Company structure

The introduction of the Variable Capital Company (VCC) by end of 2019 is set to bolster the City State’s position as a fund management hub

In 2016 the Singapore government started consultations for the introduction of the VCC. The Variable Capital Companies Act was passed in October 2018, and the government is aiming to launch the full VCC framework at the end of 2019.

The VCC is a new corporate entity tailored for investment funds. It allows funds to be set up as a standalone, or as an umbrella entity with one or more sub-funds with different investment objectives, assets, debts and investors. Umbrella entities will be ring-fenced to ensure no contagion risk.

The structure of the VCC will offer more operational flexibility as it is not subject to the limitations of the Company Act with regards to capital maintenance, disclosure requirements, re-domiciliation, etc.

VCCs should be treated as a company for corporate income tax purposes. To ease the compliance burden, an umbrella VCC will be able to file a single tax return regardless of the sub-funds that it has. GST will be applicable at the sub-fund level and stamp duty will also be levied at sub-fund level.

Funds that are currently organised and structured in other jurisdictions will be able to re-domicile in Singapore. VCCs (including umbrella entities) will be able to benefit from tax incentives enjoyed by funds established in Singapore.

Like other funds and companies, VCCs will have to adhere to Singapore’s substance requirements, will need to have a registered office, company secretary, auditor and at least one Singapore-resident director.

The introduction of the VCC will encourage fund managers to domicile their investment funds in Singapore and should boost the country’s position as a location of choice for fund management in Asia-Pacific.

For more information on how you can set up a VCC in Singapore, contact Alpadis Group here