Variable Capital Company of Singapore

• The VCC capital must always be equal to its net assets.
• It must have a Singapore-based licensed or regulated fund manager (unless an exemption has been obtained from the relevant authorities).
• The VCC must have its office registered in Singapore and must appoint a Singapore-based company secretary.
• The VCC must appoint a qualified custodian.
• VCCs must follow the existing Securities and Futures Act (SFA) requirements for investment funds.
• The VCC must be audited by a Singapore-based auditor on an annual basis and must present its financial statements in compliance with IFRS, Singapore FRS, or US GAAP accounting standards.

A VCC is treated as a company and single entity for income tax purposes, whether it is set up as a stand-alone or as an umbrella vehicle with sub-funds. An umbrella VCC with its sub-funds is only required to submit a single corporate income tax return with the Inland Revenue Authority of Singapore. VCCs pay income tax at the corporate tax rate as a company, which is currently 17%. Singapore has a single-tier tax regime, and dividends paid out to shareholders are not taxable.

The Enhanced Tier Fund (“ETF”) Scheme and Singapore Resident Fund (“SRF”) Scheme under the Income Tax Act are extended to VCCs in a manner similar to how they are applied to Singapore companies. Under these incentives, the ‘‘specified income” (includes gains) derived by the fund from ‘‘designated investments’’ is exempt from tax. The list of designated investments covers a wide range of investments, including stocks, shares, securities, and derivatives. The only significant exclusion is for immovable property in Singapore whose gains are not exempt from taxation.

Under the ETF Scheme, the applicant’s fund, among other conditions, must have a minimum fund size of S$50 million at the time of application and an annual local business spend of at least S$200,000. Approval from the Monetary Authority of Singapore (MAS) is required for acquiring the ETF status.

The condition that the fund should have an annual business spend of at least S$200,000 is also applicable for the SRF Scheme. Under the SRF scheme, a resident fund enjoys access to Singapore’s large tax treaty network, which now stretches to more than 80 countries. Specific approval must  also be sought from the MAS to access the tax exemption under the SRF.

In addition to the above-listed VCC benefits, the Monetary Authority of Singapore has launched a VCC Grant Scheme to help fund managers defray the costs of incorporating or registering a VCC. Under the scheme, the state will co-fund up to 70% of eligible expenses paid to Singapore-based service providers for the incorporation or registration of the VCC. The grant is capped at S$150,000 for each application, with a maximum of three VCCs per fund manager. Thus, each fund manager can defray upto S$450,000 of the costs of setting up a VCC.

The scheme started on January 16, 2020, and will operate until January 15, 2023.

VCC incorporation, like registration of all other Singapore companies, is a straightforward and well-defined process.

1. Apply for a New VCC Name

To complete this task, you must file the relevant application with the proposed VCC name, details of proposed director and VCC officers — including address, ID number, ID type and nationality, and in-principle approval obtained from other authorities (if any). The application generally takes up to 14 days to process. You will receive the transaction number of the approved name application.

2. Apply for Your VCC Registration

When applying, you will need to submit the following information:

• Transaction number of the approved name application;
• Details of VCC officers, including address, ID number, ID type, nationality, and contact information;
• Details of Permissible Fund Manager and subscribers;
• Registered office address;
• Working hours of your VCC;
• Copy of your constitution;
• Financial year end and period.

Note that:

• You must pay a non-refundable fee of S$8,000 for incorporation of a VCC.
• Only a subscriber to the constitution of the VCC or a Corporate Service Provider (CSP) may file the form.
• Foreign Identification Number holders are advised to seek consent from the relevant pass-issuing authority (e.g. MOM or ICA) before registering or taking on an appointment (e.g. director, secretary) in an entity.
• If any director or shareholder is a foreigner, you are obliged to engage a CSP to incorporate your VCC.
• At least one director must be ordinarily resident in Singapore.
• At least one director (who may be the same person as in the point above) must be either a director or a qualified representative of the fund manager of VCC.

3. Get Your Business Profile

You will receive a free Business Profile of the entity after it has been successfully incorporated.
This will include a Unique Entity Number (UEN) issued to your VCC. This UEN is the business entity's identification number, which is required for transacting with government agencies.

If you intend to incorporate an umbrella structure, each of the sub-funds must be registered with the ACRA through a special form, although the sub-fund is not considered a separate legal entity.

You must submit the following information to complete this transaction:

• UEN and name of an umbrella VCC;
• Proposed name of sub-fund; and
• Date of formation of sub-fund.

Note that:

• The application may be referred to MAS and you may be asked to change the proposed name of your sub-fund;
• The application may take up to 14 days to be processed;
• You must pay a non-refundable filing fee of S$400 for registration of a sub-fund; and
• Registration of a sub-fund is only applicable for an umbrella VCC; a non-umbrella VCC does not need to follow this step.