As financial markets evolve, Singapore has emerged as a premier center for fund management, bridging the gap between Asian and Western financial markets. The introduction of the Variable Capital Company (VCC) fund structure in 2020 represents a game-changing solution for global funds seeking tax-efficient options within the APAC region.
Why Singapore Over Traditional Offshore Havens?
Singapore stands out as a leading financial hub with a comprehensive ecosystem of international financial service providers, venture capital, and private equity firms, all regulated by the Monetary Authority of Singapore (MAS). This regulatory framework ensures that assets are both secure and well-managed, with seamless access to Singapore's robust financial infrastructure. Unlike traditional offshore havens such as the Cayman Islands and BVI, Singapore offers added convenience, extensive networking opportunities, and the chance to enjoy world-class local cuisine, luxury hotels, and vibrant attractions.
Setting Up Your Fund: Engaging Singaporean Fund Managers
Private Equity (PE) or Venture Capital (VC) firms can apply for licenses directly in Singapore to manage their funds. However, this process can be both costly and complex due to numerous regulatory hurdles. A more efficient alternative is to partner with an established fund management company in Singapore that already holds a Capital Markets Services (CMS) license. This arrangement allows PE/VC managers to concentrate on their fund's strategic goals while the licensed manager handles the fund's setup and ongoing management.
The VCC Structure
The VCC structure is a corporate entity designed specifically for fund management in Singapore. Typically, fund managers will recommend adopting a VCC structure for its flexibility and regulatory benefits. Fund administration companies handle essential functions such as accounting, NAV calculations, documentation, transaction processing, and investor communication.
Choosing Your Fund Manager
VCCs must be managed by fund managers licensed by MAS, unless exempted. These fund managers coordinate and oversee critical services, including legal and accounting functions, ensuring the smooth operation of the fund.
Fund Administration
Fund administrators are responsible for managing net asset value (NAV) calculations, reviewing documentation, processing transactions and expenses, responding to investor queries, and preparing annual financial statements.
Fund Options
Sub-Fund Under an Existing VCC Umbrella
A sub-fund can be established under an existing tax-exempt VCC umbrella if the umbrella encompasses the PE/VC’s investment asset class. This sub-fund will have distinct assets, liabilities, name, managers, subscribers, and strategy, providing privacy since investor lists are not publicly disclosed.
Establishing a New VCC Umbrella
Creating a new VCC umbrella offers greater flexibility for forming multiple sub-funds and establishing a unique legal entity in Singapore. While this option may involve higher setup costs and longer processing times, it allows for a customized fund structure and requires its own tax exemption application.
Open-Ended vs. Closed-Ended Funds
Closed-Ended Funds: Ideal for investments with longer maturation periods. Investors cannot redeem their investment until the fund is wound up, and the number of investors is fixed at the subscription deadline.
Open-Ended Funds: Suitable for funds with liquid investment methods, such as hedge funds, allowing periodic redemptions by investors.
Tax Exemption for VCCs
Many VCCs in Singapore benefit from tax exemptions under the 13O/13U schemes, provided they meet specific requirements and adhere to designated investment criteria. VCC income from PE/VC investments is assessed for tax at the umbrella level, subject to compliance with conditions such as fund size and local spending.
Regulatory Requirements
At least one director must be a resident of Singapore.
A Singapore resident company secretary is required.
The VCC must comply with Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) procedures, supervised by MAS.
Annual audits by a Singapore-based auditor are mandatory, with returns filed after the AGM and within seven months of the financial year-end.
Costs
Setup fees for fund managers and administrators typically start around $50,000, with annual fees ranging from 0.3% to 0.6% (minimum $70,000 – $100,000) of assets under management. Costs may vary based on the complexity and scale of the fund.
Connect with Us
For personalized assistance and expert guidance on setting up your VCC fund in Singapore, contact us at info@mvgtrust.com. Our team of professionals is ready to help you achieve your investment goals with a customized fund structure tailored to your needs.
