Setting Up a Variable Capital Company (VCC) in Singapore [Updated 2024]

 

Singapore has long been recognized as one of the best fund management hubs in the world. Over the last decade, the government has taken the necessary steps to develop the country's growing fund management industry. The goal was to enhance Singapore's global fund management sector competitiveness.

The Variable Capital Companies Act officially came into effect on 14 January 2020. As of the time of writing, there are more than 500 family offices in operation in Singapore, with another 700 applications currently under review by the Monetary Authority of Singapore (MAS).

The new legal framework has similarities with existing fund vehicles in Singapore in the form of a trust, limited partnership, or a standard private company. However, the differences could be quite difficult to unravel.

This article will discuss the VCC fund structure more, from features, benefits, tax incentives and setup costs. We'll also add flavour from what we see on the ground for Singapore to be a leading wealth management centre. There are certain benefits to investors under this structure not to be missed.


Important Note: This article is a guide to setting up a specialized company variation known as a Variable Capital Company. To find information on standard company setup in Singapore, see our detailed company registration guide here.

Overview of a Variable Capital Company (VCC)

The VCC corporate structure was launched in January 2020. This sought to introduce Singapore fund structures that are common across established global fund centres such as Hong Kong, the United Kingdom, Ireland and Luxembourg. A VCC could be used as an alternative or traditional investment fund, simultaneously allowing for both open and closed-end strategies. 

The Singapore government created this new corporate structure to attract hedge funds and family offices that have their assets registered in low-tax jurisdictions such as the Cayman Islands. This was in response to the EU's decision in February 2020 to add the Cayman Islands to its blacklist of non-cooperative tax jurisdictions.

The VCC is largely similar to other fund centres in terms of governance. The main difference is that the VCC requires at least one director or a qualified representative of the fund management company on the Board of the VCC.

Listed below are the key benefits of incorporating as a VCC:

Seven Benefits of Setting Up a VCC in Singapore

1. Enhanced flexibility in the issuance and redemption of shares

In a VCC structure, funds can issue and redeem shares without prior shareholders approval. This creates tremendous convenience for entry and exit for investors. Dividends can also be distributed out of capital or profits freely. This workaround provides extra options to fund managers when it comes time to meet dividend payment commitments.

The capital of a Variable Capital Company is always equal to its net assets. This allows for a measure of flexibility when distributing wealth among investors.

2. Umbrella structure allowing economies of scales and cost efficiencies

How does a VCC work? A VCC can work as a standalone fund or as an umbrella structure. The latter provides substantial cost savings since the sub-funds can share costs incurred in setting up and maintaining the entities. Sub-funds will also have the same service providers, including the same administrative agent, auditor, fund manager, and custodian.

3. Non-public register giving added anonymity and privacy

While VCCs need to maintain their register of shareholders, this information is not required to be made public, offering full privacy to ultimate beneficiaries. While there is a need to prepare financial statements for filing with ACRA and tax reporting with IRAS every year, the financial statements of all VCC standalone and sub-funds would not need to be made publicly available.

However, upon request, VCCs must send this information to regulating bodies, including MAS, IRAS, and ACRA.

4. Enhanced safeguards with segregation of assets and liabilities

Separating the assets and liabilities of all the sub funds within an umbrella VCC is important so that the investors in VCC and creditors of the sub funds are protected.

According to the Singapore VCC Act, a sub fund's assets cannot be used to pay for any of the liabilities of the umbrella VCC or other sub funds. Any liability of a sub fund must be paid for with the assets of that sub fund only.

This can reduce the risk of contagion.

5. Tax Incentives Available at Umbrella Level

Any discussions about VCC would not be complete without mentioning tax incentives and exceptions available to the corporate structure.

The most notable tax exemption schemes are the 13X and 13R. Most of their investment gains will be tax exempt if a VCC has successfully applied for the tax exemption scheme. The "permitted investment gains" include almost every type of financial transaction you can think of, except for anything to do with Singapore real estate.

The tax incentive conditions will be granted to the umbrella VCC rather than the individual sub-funds. This is important because it could make it easier to meet the requirements for the tax incentive.

6. Generous subsidy with VCC Grant from MAS of up to S$450,000

The Monetary Authority of Singapore provides a subsidy to defray the costs involved in incorporating or registering a VCC. The VCC Grant will co-fund up to 70% of eligible expenses paid to Singapore-based service providers for the fund set up, with a total cap of S$150,000 per VCC, with a maximum of three VCCs per fund manager (i.e. S$450,000).

This includes fees paid to fund administrators, tax structuring, fund legal formation, corporate secretarial costs like business incorporation, local director fees, and more.

7. Relocation with Employment Passes

Besides attracting capital, Singapore is also committed to attracting international talent.

With the onshore fund tax incentive scheme of 13R and enhanced-tier fund tax incentive of 13X, a respective of one and three employment passes (EP) would be granted to senior managers/owners of the fund who are based overseas and intending to relocate to Singapore. This pass allows foreigners to legally work, stay in Singapore, and bring their immediate family dependents.

By now you probably have more questions about setting up a VCC in Singapore.

Fill up the form below and schedule an appointment with one of our dedicated account managers.

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Singapore VCC vs Cayman Island SPC

Many may wonder, how is the Singapore VCC different from the Cayman island SPC?

Firstly, whilst the VCC offers all of the flexibility of an SPC fund, it should be faster, easier and less expensive to open and operate. This is in part due to the fact that most regulatory requirements have already been taken care of by the Singapore fund management companies, saving time and money. Second, Singapore also allows everything to be done within one central area of Singapore, as opposed to Cayman Island, where most processes are done offshore which will save both investors and fund managers substantial costs.

Aside from the above differences, there are subtle differences from the operational standpoint such as Director requirements, fund manager location, shareholder privacy, and financial reporting which are common investor considerations.

We summarize the key points below:

Comparison between Singapore and Cayman VCC

Key Characteristics of VCC

Legal Standing

  • The VCC holds separate rights and duties different from those of the directors or shareholders.

  • Under an umbrella VCC, a sub-fund is not considered a legal entity that is separate from the VCC. However, the VCC can sue in the name of a sub-fund (or be sued). In that case, the sub-fund acts as a legal person. The government treats the property holdings of a sub-fund as if the sub-fund was its separate legal person.

  • Overseas funds can now be redomiciled to Singapore by converting them into a corporate entity structure that is similar to VCCs. The funds can then be re-domiciled as VCCs in Singapore. Alternatively, the funds can be freshly incorporated into a Singapore variable capital company.

VCC Ownership

  • The shareholders are the legal owners of the VCC, just like in a standard private limited company.

  • While there is no maximum, one (1) is the minimum amount of shareholders possible.

  • If a shareholder would like to exit an investment, it is possible to sell those shares back into the VCC itself.

  • The VCC constitution may be amended by the directors for the purpose of establishing or varying a sub-fund without the consent of members if this right is outlined in the constitution.

Shareholder Liability

  • A shareholder's obligation to contribute to the liabilities of a VCC or a sub-fund is limited to the amount that he/she has not yet paid for his/her shares. There are no extenuating liabilities to the shareholder, other than their capital invested in the VCC.

Securities Types

  • A VCC will issue shares, and each share of a VCC will correspond to a unit of the CIS. The members of a VCC are also unitholders of the same CIS.

How to Set Up a Variable Capital Company (VCC)

Similar to the incorporation of a standard Singapore company, setting up a Variable Capital Company is reasonably straightforward.

The MAS licensing process for VCC is also relatively more straightforward than traditional fund management structures, both in ongoing compliance requirements and in the initial setup. This makes VCC a great alternative to existing structures as limited liability partnerships, limited companies, or trusts.

Here are the steps involved with incorporating a VCC:

1. Submit a VCC Name Application Online

The first step is to fill out an application to reserve the VCC name. The application must include

  • A new name for the VCC

  • The type of VCC

  • Details of the proposed director and officers, e.g. residential address, ID type, ID number, nationality

  • In-principle approval

In general, the process takes around 14 days. After sending the application, you will receive a transaction number.

2. Apply for VCC Incorporation

When applying for a VCC incorporation, you will need the following:

  • The transaction number of your VCC name application mentioned above.

  • The details of the proposed VCC director and company officers, including the address, ID type, ID number, contact information, and nationality.

  • Permissible Fund Manager and subscribers details.

  • Address of the registered office.

  • Hours of operation of the VCC.

  • Copy of the VCC constitution.

  • Choice of your Financial Year End (FYE), e.g. 31 March, 30 June, 30 September or 31 December.

Important note about the application process:

  • ACRA charges a non-refundable S$8,000 fee on incorporating a VCC.

  • The only person eligible to file the VCC application form is the subscribers to the constitution or a Corporate Service Provider (CSP).

  • If a shareholder or director is a foreigner, they are required to use a CSP to incorporate your VCC.

  • There must be at least one director who is currently a resident of Singapore.

  • One or more directors must also be a Qualified Representative or director of its fund manager.

  • The application and approval of a VCC incorporation take up to 14 days. However, it may take up to 60 days if the application is referred to other departments for further review.

3. Receive a Business Profile

Once successfully incorporating the VCC, you will receive a complimentary Business Profile.

The Business Profile will include a Unique Entity Number (UEN) that will be issued directly to the VCC. The UEN is needed for any transactions with government agencies such as Accounting and Corporate Regulatory Authority (ACRA).

Piloto Asia can help you set up a VCC in Singapore

We have a team of experts who will provide full incorporation services for VCC standalone fund or umbrella fund, or onboarding a live VCC managed by our affiliate fund partner.

Contact us now and our specialist will guide you through the process from start to finish, including company incorporation requirements, VCC structure, tax framework & strategies, audit, legal assistance, and grant applications.

How to Register a VCC Sub-fund

If you would like to incorporate your VCC under an umbrella structure, you must register your sub-funds with the ACRA. It makes no difference whether the sub-fund is generally not considered a unique entity. It is still necessary to register.

To successfully register all sub-funds, the following information is required:

  • The name of the umbrella VCC, as well as the UEN.

  • The new desired name of the sub-fund.

  • The date of the formation of the sub-fund.

Please note that:

  • The MAS might ask companies to rename their sub-fund. If this happens, then a new name will be required (no exceptions).

  • It can take a maximum of 14 days to process the application.

  • Along with the application, applicants are required to pay a fee of S$400. This fee covers the cost of registration.

  • Lastly, when registering a sub-fund, the process is only applicable to the umbrella VCC. Any VCC that is not an umbrella will not require this registration.

Additional Requirements for VCC

  • The capital of a VCC is required to be equal to the net assets.

  • A legally operating VCC must hire a proper fund manager that is based and licensed by MAS in Singapore. However, it is possible to find an exemption through the proper authorities.

  • The offices of a VCC must be registered in Singapore. The offices must also have a Singapore based secretary on staff.

  • A qualified custodian must be appointed by VCC. Note that private equity and venture capital funds do not need to appoint a custodian.

  • VCCs are not exempt from the Securities and Futures Act. They must follow the same requirements as investment funds.

  • An annual audit of VCC’s accounts is required by an external auditor based in Singapore.

  • The VCC must present audited financial statements that comply with IFRS, US GAAP, or Singapore Financial Reporting Standards (FRS).

The Extended Variable Capital Companies Grant Scheme (VCCGS)

The Variable Capital Companies Grant Scheme or VCCGS was first introduced on January 15 2020, covering a period of three years until January 15 2023.

As of January 16 2023, the VCCGS has extended for another period of two years (ending on January 15 2025) and is referred to as the Extended VCCGS.

Under the Extended VCCGS, the Financial Sector Development Fund or FSDF co-funds 30% of qualifying expenses paid out to Singapore-based services or service providers for performing qualifying work in relation to the incorporation of VCC in Singapore. This grant is capped at S$30,000 per application.

Determining Eligibility

Applicant Eligibility

First time qualifying fund managers must not have incorporated or registered a VCC or successfully re-domiciled a foreign corporate company as a VCC, and have not applied for the VCCGS.

Project Eligibility

The Extended VCCGS is only available to first-time qualifying fund managers that have incorporated a VCC or re-domiciled a foreign corporate company in Singapore as a VCC. First-time qualifying fund managers will also need to have a Notice of Incorporation or Notice of Transfer of Registrration from the Accounting and Corporate Regulatory (ACRA) dated between January 16 2023 and until January 15 2025.

Project eligibility will need to have met the following conditions:

  • The VCC setup must not be simultaneously funded by other government grants or incentives in relation to the same set of qualifying costs and commitments

  • Applicants will only apply for the Extended VCCGS for qualifying work performed in relation to one VCC that has been incorporated or re-domiciled in Singapore

  • Qualifying expenses need to be paid out to Singapore-based service providers for work done in Singapore with regards to incorporation and registration of the VCC and its sub-funds (if there are any)

  • Qualifying fund managers can’t claim co-funding under the grant scheme just for the sole reason of registering sub-funds (without accompanying incorporation or transfer of registration of a VCC). A qualifying fund manager may claim qualifying set up costs for registering sub funds as part of the set up of an umbrella VCC in Singapore.

  • Applicants can submit their applications within three months from the date specified on the Notice of Incorporation from ACRA for newly incorporated VCCs or within three months from the date of ACRA’s approval of the VCC’s evidence of de-registration (this applies to foreign corporate entities that have re-domiciled to Singapore)

Funding

30% of the co-funding of qualifying expenses are covered by the grant and capped at S$30,000 per VCC:

  • Tax services

  • Legal services

  • Regulatory compliance or administrative services.

You can download the Extended VCCGS Factsheet for more information on qualifying expenses.

Please refer to the downloadable Extended VCCGS Factsheet for full details on qualifying expenses: Extended VCCGS Factsheet (147.5 KB)

What’s The Minimum Operational Period?

A VCC that’s been awarded a grant under the Extended VCCGS is required to remain operational for at least one year from the date of registration. This means that the VCC can’t be wound up within the first year from the Registration Date.

In case the VCC is wound up within the first year from the Registration Date, the qualifying fund manager needs to inform MAS promptly by no later than one week from the date of application about the winding up or passing of resolution for voluntary winding up.

MAS reserves the right to take back any grant awarded if the VCC wound up within their first year from the Registration Date, or if the applicant has failed to notify MAS about the winding up within one week from the date of winding up.

Tax Considerations for Variable Capital Companies

Different tax treatments when you set up a standalone or umbrella VCC.

Statutory Tax Rates

Similar to a locally incorporated company, a VCC would be subject to statutory and headline taxes. When a VCC is setup under an umbrella structure with attached sub-funds, the sub-funds are only required to provide a single income tax return under the parent fund.

At the time of writing, the statutory headline corporate tax for companies in Singapore is 17%. Singapore also has a single-tier tax system. The single-tier system means that dividends paid to shareholders should not be taxed. VCCs may also leverage Singapore's lucrative double tax treaty as well as individual tax incentives.

S13O and S13U for Singapore Fund Management Companies

In order for Singapore to attract high net-worth individuals (HNWI) and families to set up their family offices, the government made two tax incentive schemes known as Section 13R and 13X under the Income Tax Act. These were later updated to Section 13O and 13U respectively.

The table below will show the updated conditions of the S13O and S13U Tax Schemes:

Funds Tax Incentive Scheme

The government has over the years introduced several tax-exemption schemes. Singapore introduced the Offshore Fund Tax Exemption Scheme (13CA), the Resident Fund Scheme (Updated to S13O, formerly known as 13R) and the Enhanced Tier Fund Tax Exemption Scheme (Updated to S13U, formerly known as S13X) to provide management firms with enticing incentives when they relocate to Singapore. Unsurprisingly, these incentives have created impressive growth, and Singapore is now the home base for numerous world-renowned management firms.

On 11 April 2022, the Monetary Authority of Singapore (MAS) updated the conditions and procedural requirements of the tax incentive schemes. The new guidelines now had more stringent criteria in place for family offices looking to avail of the tax incentive schemes under what was previously known as Section 13R and 13X.

In the past year alone, the incorporation of close to 100 VCCs within a short span of 6 months has proved the structure to be a huge success, as several worldwide fund management firms now call Singapore home.

VCCs are eligible for two different tax schemes. The Enhanced Tier Fund Scheme (13X) and the Singapore Resident Fund Scheme (13R). These schemes are applied the same way that they are applied to a Singapore company. Under 13X and 13R, specified income from designated investments will be exempt from tax.

In general, specified income includes the majority of trading gains and remittances of income into Singapore. Designated investments under 13X and 13R includes:

  • Shares and stocks of any companies

  • Qualifying financial derivatives

  • Qualifying unit trusts

  • ETFs

  • REITs

  • Futures

  • Forex transactions

  • Foreign currency deposits with overseas FIs

  • Immovable property from overseas

Do notice that interest from debt securities and REITs distributions are exclusions.

Conclusion


A Variable Capital Company is a new and innovative structure in Singapore. With its launch since January 2020, Singapore has strengthened itself further as a global financial leader. It also provides excellent jurisdiction for investors and global fund managers, notwithstanding the added benefits of significant tax advantage using Singapore as a reliable jurisdiction in Asia.

The structure of a VCC is very alluring to fund managers from foreign countries. Fund managers can utilize over 80 individual tax treaties provided by the government of Singapore. In addition to tax exemptions, it is possible to apply for the VCC Grant Scheme, granting up to S$450,000 per fund manager.

If you are looking for guidance or would like to incorporate a VCC in Singapore, get in touch with our professionals in Piloto Asia. As a full service corporate service provider, Piloto Asia offers one-stop corporate secretarial services, and also services with ongoing compliance, human resource outsourcing and tax reporting in Singapore.

Frequently Asked Questions

  • A Variable Capital Company (VCC) in Singapore is an innovative legal structure designed for investment funds. It offers flexibility in the issuance and redemption of shares, allowing for variable capital based on investor demand. With a distinct legal identity, VCCs can establish multiple sub-funds, all while being regulated by ACRA and MAS. The VCC complements other investment fund structures in Singapore, such as limited partnerships and unit trusts.

    The versatile VCC structure provides a unique corporate framework and the option to re-domicile foreign funds to Singapore. Suitable for a variety of investment strategies, the VCC offers fund managers enhanced operational efficiency and scalability, further solidifying Singapore's position as a premier asset management hub in the region.

  • In Singapore, a Variable Capital Company (VCC) and an incorporated company (commonly referred to as a private limited company) are different types of legal entities with distinct characteristics:

    1. Structure:

    • VCC: A VCC is a corporate entity specifically designed for investment fund structures. It has the flexibility to issue and redeem shares based on investor demand, allowing for variable capital. A VCC can have multiple sub-funds within it, each with its own investment strategy and portfolio.

    • Incorporated Company: An incorporated company, such as a private limited company, is a more general type of corporate entity commonly used for various business purposes. It has a fixed capital structure, with a specified number of shares owned by shareholders.

      2. Legal Personality:

    • VCC: A VCC has a separate legal personality from its shareholders. It can enter into contracts, own assets, sue, and be sued in its own name.

    • Incorporated Company: An incorporated company also has a separate legal personality. It can operate independently from its shareholders, enter into contracts, and be held liable for its own obligations.

      3. Regulatory Framework:

    • VCC: The VCC framework is regulated by the Accounting and Corporate Regulatory Authority (ACRA) and the Monetary Authority of Singapore (MAS). The VCC framework provides specific regulations and requirements for investment funds.

    • Incorporated Company: Incorporated companies are regulated under the Companies Act in Singapore. They have their own set of compliance requirements and reporting obligations.

      4. Use Cases:

    • VCC: VCCs are primarily used as investment fund vehicles, offering a flexible and efficient structure for pooling capital from investors and investing in various asset classes.

    • Incorporated Company: Incorporated companies are used for a wide range of business activities, including operating commercial ventures, providing services, conducting trade, and more.

    In summary, while both VCCs and incorporated companies serve as legal entities in Singapore, they cater to different needs and have distinct regulatory frameworks. VCCs are tailored for investment funds, offering flexibility in capital structure, while incorporated companies are versatile entities suitable for a broad spectrum of business activities.

  • In Singapore, an Umbrella Variable Capital Company (VCC) is a specialized structure tailored for investment funds, allowing the establishment of multiple sub-funds under a single entity. Each sub-fund has its own investments, shares and unique identification number. Crucially, the assets and liabilities of each sub-fund are ring-fenced, ensuring that the assets of one cannot be used to satisfy the liabilities of another. This segregation is strictly enforced, and any provisions inconsistent with it are void.

    To safeguard third parties and maintain transparency, a VCC is mandated to disclose specific details about its sub-funds, including their unique identification numbers and the fact that they have segregated assets and liabilities. Additionally, all sub-funds under an umbrella VCC must be managed by the same fund manager. Importantly, winding up an individual sub-fund doesn't lead to the winding up of the entire umbrella VCC.

    The VCC framework, regulated by ACRA and MAS, also allows a sub-fund of a VCC to invest in other sub-funds of the same VCC. Given the intricacies and specific regulations surrounding VCCs, it's advisable to seek professional guidance like Piloto Asia for compliance and implementation.

  • Currently, Single Family Offices (SFOs) cannot directly set up as a Variable Capital Company (VCC) in Singapore. This is because VCCs must be managed by permissible fund managers, which include Singapore fund managers licensed or registered by the Monetary Authority of Singapore (MAS). SFOs, which do not manage third party funds, are not required to be licensed or registered in this manner.

    However, family offices and high net worth individuals are increasingly leveraging sub-funds under the VCC structure to have their assets professionally managed. Additionally, the MAS is actively considering enhancements to the VCC framework to potentially include SFOs in the future.

    For family offices interested in the VCC structure, it's advisable to monitor regulatory updates and seek professional guidance for optimal structuring and compliance.

  • The Singapore Resident Fund Scheme (SRFS) is a tax incentive program by the Monetary Authority of Singapore (MAS) to bolster Singapore’s position as a fund management hub. Designed to give Singapore-based fund tax exemption akin to offshore funds (like those in Cayman Islands), the SRFS provides access to Singapore’s extensive tax treaty network spanning over 70 countries.

    Notably, dividend payments from a Singapore fund are tax-exempt. Eligible funds must meet criteria of being company-structured, administered in Singapore, and obtain specific approval from MAS.. By offering these advantages, the SRFS aims to attract global funds, enhancing Singapore's asset management industry.

  • A Variable Capital Company must appoint a Permissible Fund Manager to manage its assets or operate the Collective Investment Schemes (CIS) that comprise the VCC. A Permissible Fund Manager can be one of the following:

    Licensed Fund Management Company (LFMC)

    • Holds a capital markets services license for fund management under the Securities and Futures Act.

    • Complies with regulations like the Securities Act and anti-money laundering guidelines.

    Registered Fund Management Company (RFMC)

    • Registered under the Securities and Futures (Licensing and Conduct of Business) Regulations.

    • Manages assets for up to 30 qualified investors, not exceeding S$250 million in total value.

    Exempted Financial Institutions

    • Exempted from holding a capital markets services license under the Securities and Futures Act.

    • Includes banks, merchant banks, finance companies, and certain licensed companies.

    All fund managers must adhere to MAS's "fit and proper" criteria.

  • Yes, a VCC can appoint multiple fund managers if necessary. Each fund manager must meet the requirements outlined by the Monetary Authority of Singapore (MAS) and comply with the relevant regulations.

  • Corporate tax services in Singapore for VCCs can be provided by various professionals, including accountants, lawyers, and tax consultants. These professionals will have the knowledge and experience to help VCCs comply with Singapore tax laws and regulations and minimise their tax liability.

  • As Singapore's #1 corporate service provider, Piloto Asia plays a crucial role in the incorporation of a Singapore company. We offer a comprehensive range of services to guide businesses through every step of the incorporation process.

    Our services begin with a feasibility analysis to understand your company's needs and help you choose the right business structure. We assist in registering your company with the Accounting and Corporate Regulatory Authority (ACRA), ensuring your company name is approved and all necessary documents are prepared and submitted.

    Additionally, we help set up your corporate bank account and ensure compliance with all legal and regulatory requirements, such as appointing a resident director and company secretary. Our expertise extends to providing business information resources and ongoing support to ensure your company operates smoothly and successfully from day one.

    For foreign entrepreneurs and professionals, we also assist with Employment Pass (EP) applications, ensuring you meet the eligibility criteria and submit the necessary documentation. The Employment Pass allows you to work and manage your business in Singapore, facilitating a smooth transition for your new company.

    With Piloto Asia, the incorporation process is streamlined and efficient, allowing you to focus on growing your business in Singapore.

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