The Monetary Authority of Singapore (‘MAS’) has today announced the tax framework for Variable Capital Companies (‘VCCs’). This announcement details the manner in which the Resident Fund Scheme of Section 13R and the Enhanced-Tier Fund Scheme of Section 13X of the Income Tax Act (Cap. 134) are to be extended to VCCs.
The highlights of the tax framework are as follows:
1. A VCC is to be treated for Singapore tax purposes as a single entity. A number of consequences flow from this:
a) For an umbrella VCC applying for approval under the Enhanced-Tier Fund Scheme, the size of each sub-fund is irrelevant provided that the VCC as a whole satisfies the S$50 million minimum fund size requirement at the time of application. A similar analysis applies to the $200,000 minimum expenditure requirement which operates in a slightly different manner between the two tax
b) Under the Resident Fund Scheme, a financial penalty is levied on an investor who beneficially owns, together with their associates, more than a prescribed percentage of the issued securities in an approved fund. The percentage ownership of an investor and their associates of an umbrella VCC that has been approved under this tax incentive scheme is to be calculated across all subfunds.
c) There is no ongoing requirement for the purposes for an umbrella VCC to seek MAS approval for the creation of new sub-funds. This is provided that a VCC and all of its sub-funds continue to invest within the scope of the investment mandate as described in its offering document.