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Variable Capital Company (VCC)

A new corporate entity structure under which several collective investment scheme may be gathered under the umbrella of a single corporate entity and yet remain ring-fenced from each other. 

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What is a VCC, and how does it work?

 

What is a VCC? By definition, a VCC is known as a Variable Capital Company, which is a new corporate entity structure under several collective investment schemes gathered under the umbrella of a single corporate entity, and yet remained ring-fenced from each other.

Being the world’s financial hub, VCC is said to make a big difference for Singapore’s wealth and asset management industry.

The purpose of a VCC is to provide suitable alternatives to existing collective investment schemes (CIS), such as partnerships, corporations, trusts etc. In other words, a VCC can be used as a traditional or alternative fund strategy, either in open-ended or close-ended forms. It has a variable capital structure that provides flexibility in redemption of its shares and issuance. However, when it comes to corporate taxation, VCC will still be seen and treated as any other regular Singapore company.

 How VCC will be a Game Changer for Singapore

For the longest time, Singapore has relied on the fundamentals for a stable economy, such as light regulatory action and corporate tax rates to maintain its investment appeal. Despite the fact that the fundamentals have served Singapore well in its economy, it is missing an investment structure like the VCC to become better as a global investment force. With the introduction of the VCC structure, this allows Singapore to maintain its competitive investment edge by adopting good practices from other leading tax havens.

With the VCC structure in place, this will allow Singapore to build on its existing global reputation in the fund servicing space. Additionally, the VCC will help to attract funds away from other tax havens such as Dublin and Luxembourg, thereby resulting in an influx of investment into the country. This influx of offshore investment will help to future stabilise the Singapore economy due to increased employment from new job creation – both inside and outside of fund management service providers, thereby building the foundation for Singapore’s economic growth.

 What are the benefits of setting up a VCC?

While there are many benefits associated with the setting up of a VCC, there are 3 main benefits from doing so.

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Enhanced flexibility in issuance and redemption of shares

Under a VCC structure, funds can issue and redeem shares without prior approval from shareholders. This increases the flexibility for investors as they can enter and exit the company easily. Additionally, dividends can also be distributed out of capital or profits freely, thereby increasing the convenience for fund managers to meet dividend payment commitments.

Generous subsidy with VCC grant from MAS of up to $450,000

 

Presently, the Monetary Authority of Singapore (MAS) provides a subsidy (VCC Grant) to cover the costs involved in incorporating or registering a VCC. The VCC Grant co-funds up to 70% of eligible expenses (including feed paid to fund administrators, tax structuring, fund legal formation, corporate secretarial costs like business incorporation, local director fees etc.) 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).

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Relocation with employment pass

Singapore’s position as a global financial hub shows its commitment towards attracting capital and international talent. The implementation of the VCC brought about tax exemption schemes such as the 13R and 13X. With these two onshore fund tax incentive schemes, a respective of one and three employment passes (EP) would be granted to senior managers or owners of the fund who are based overseas and intending to relocate to Singapore.

How to set-up 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 a 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).

WANT TO KNOW MORE?


The VCC structure is a relatively new and novel capital structure in Singapore, having launched in January 2020. Since its implementation, Singapore has strengthened its position as a global financial leader with its first-class jurisdiction for investors and global fund managers, accompanied with the added benefits of significant tax advantage using Singapore as a reliable jurisdiction in Asia.

Thus, with the various tax treaties provided by the Singapore government coupled with the VCC Grant Scheme, it can be anticipated that there will be an increase in the incorporation of the VCC structure in Singapore’s business environment

If you would like to know more in depth on how to set up a VCC, you can visit ACRA’s website here for more detailed information on VCC. If you need assistance to start up a VCC and would like professional help, contact us now by clicking the button below!

 

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