What is a Variable Capital Company (VCC)

Variable Capital Company (VCC) is an alternative form of company that is about to be applied to Collective Investment Schemes (CIS). At present, the organizational structures applicable to collective investment plans include companies, limited partnerships, and unit trusts. Variable capital companies can serve as an alternative to traditional fund strategies. Due to the flexible capital flow of the company, stocks are generated during investment and shareholders can redeem them at any time.

The existing corporate form under the Company Law has certain limitations on capital reduction and dividend distribution, which lacks such flexibility. This new corporate form specifically designed for the fund management industry will strengthen Singapore's position as a regional fund management center.

Important features of VCC

Suitable for open and closed end investment funds (including hedge funds, private equity funds, and real estate funds) that adopt different investment strategies.

It can be used as a separate fund or as an umbrella fund or sub fund that can be easily joined (each sub fund's assets and liabilities are legally separate from other sub funds and VCCs themselves).

Umbrella funds can have open end sub funds and closed end sub funds.

Foreign enterprise investment funds can be registered in Singapore in the form of VCCs.

VCC allows individual shareholders or assets to be held (hence can be used in the main link structure).

VCC shareholders must submit to the Accounting and Corporate Control Agency (ACRA) along with other information, but do not need to disclose it to the public.

For tax purposes in Singapore, VCC will be treated as a single entity and will enjoy tax benefits under the 13R and 13X tax incentive plans, so all designated investment income will be essentially tax-free income.

Advantages of VCC

one

VCC can serve as an independent fund (composed of a single investment portfolio) or as an umbrella entity with various seed funds, achieving the separation of investment portfolios and liabilities. Having multiple funds in a single VCC can improve cost efficiency.

two

VCC capital will always be equal to its net assets. Because VCC stocks are only generated during investment. Due to the fact that dividends can be paid out of capital, flexibility is provided in terms of distribution and reduction of capital, thereby simplifying the ability of fund managers to fulfill dividend payment obligations.

three

By registering it as a Singapore VCC, fund managers can easily re register existing overseas investment funds.

VCC also has some tax incentives. These include:

VCC is not subject to capital requirements like Singapore's open-end funds, and can use the country's over 80 tax treaties (DTAs).

Umbrella VCC only needs to submit a Corporate Income Tax Return (CIT) to the Singapore Taxation Authority (IRAS).

If VCC's income meets the government's S13X, it can be exempt from tax. There are two conditions:

1. The minimum capital size of VCC must be S $50 million;

2. Local business expenses must be SGD 200000.

VCC is eligible to enjoy the Start Up Tax Exemption Scheme (SUTE) and receive 75% tax exemption on the top 100 Singapore dollars of income receivable for three consecutive years. The taxable income of SGD 100000 is eligible for a 50% tax reduction.