The VCC is treated as a company and a single entity for tax purposes. As such, the VCC is subject to income tax in Singapore. However, the tax exemption to be had under sections 13O (referred to as “Singapore Resident Fund Scheme” or “SRF”) and 13U (referred to as
“Enhanced-Tier Fund Scheme” or “ETF”) of the Income Tax Act of Singapore that are extended to VCCs.
Stand-alone VCC
The tax treatment of a stand-alone VCC will remain the same as that of a Singapore company. Accordingly, the ETF and SRF Schemes under the Income Tax Act will apply to a stand-alone VCC similar to how it would apply to a Singapore company.
Umbrella VCC
The new provisions for umbrella VCCs provide benefits for such structures, since the conditions for the tax exemption schemes are applied to an umbrella VCC as a whole. The quantitative conditions to apply for the ETF Scheme and the SRF Scheme will apply to the umbrella VCC as a whole, rather than to each sub-fund.
Therefore, if a VCC has, for example, four sub-funds, the business spend requirement will be set at S$200,000 for the VCC as a whole (and not S$800,000). If this VCC were to apply for the ETF Scheme, the minimum fund size requirement will be S$50 million (and not S$200 million). In this way, using an umbrella VCC poses significant benefit to fund managers who, in the past, would have had to use four Singapore companies with a fund size of at least S$200 million in total and a total local business spending of at least S$800,000, rather than now having the option of using an umbrella VCC with four sub-funds.
Some additional Incentives
The Financial Sector Incentive for Fund Management (the “FSI-FM” award) aims to promote fund management activities in Singapore. The award provides a concessionary tax rate of 10% for fund management and investment advisory activities, subject to certain conditions being met. Amongst others, in order to qualify for the FSI-FM, the applicant must be licensed or exempt from holding a capital markets services licence for fund management by the MAS, have a minimum asset under management of S$250 million and have at least three investment