In January this year, the Singapore government launched the Variable Capital Company (VCC), a new corporate structure for all types of collective investment schemes. This legislation is a potential gamechanger for the international fund management industry, affecting Singapore and neighbouring countries.
The VCC offers much more operational flexibility for investment funds. Through this entity, fund managers can establish investment funds across both traditional and alternative strategies, as open-ended or closed-end fund strategies. Investors are also eligible to receive tax benefits if they establish a VCC entity.
Details can be found on many websites of various auditing and legal firms, but I’d like to state a few interesting points.
The VCC must have at least three directors who are Singapore residents. Fund managers can easily re-domicile existing overseas investment funds by shifting their registration to Singapore.
Income from a VCC can be exempt from tax if it qualifies for the government’s Enhanced Tier Fund Scheme. The VCC has to fulfil two criteria: have a minimum fund size of S$50 million (about US$37 million) and a local business spend of at least S$200,000 (about US$147,000).
A new corporate structure for investment funds will put Singapore in the same league as other global fund hubs. But with the strong Singapore brand, it is likely to be a winning formula, as few jurisdictions will be able to match the city’s reputation.
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