The Inland Revenue Authority of Singapore has issued an e-Tax guide about tax framework for Variable Capital Companies (VCC). The e-Tax Guide explains the tax framework for variable capital companies (VCCs). The VCC is a new corporate structure for investment funds that can be used across a wide range of fund strategies, and as an open-end or a closed-end fund. Besides the incorporation of new funds, the VCC framework also allows fund managers to redomicile existing overseas investment funds with structures comparable to that of a VCC, by transferring their registrations to Singapore as VCCs.

In Budget 2018, it was announced that a tax framework will be introduced to complement the VCC framework and it was introduced by the VCC Act on 15 January 2020.

Scope of Income Tax

VCCs incorporated under the VCC Act are treated as companies incorporated under the Companies Act for income tax purposes. Further, regardless whether a VCC is a non-umbrella VCC or an umbrella VCC comprising (or that will comprise) two or more sub-funds, it will be recognized as a single entity for income tax purpose, unless stated otherwise.

Scope of GST

For GST purposes, each sub-fund of an umbrella VCC is regarded as a separate person, as a sub-fund makes independent sale and purchase decisions based on its respective investment mandate. Therefore, each sub-fund is required to assess its GST registration liability based on the value of its taxable supplies made. If a sub-fund is GST-registered, it will account for GST on its taxable supplies including any taxable supplies made to another sub-fund of the same VCC. Similarly, it can claim input tax on its taxable purchases, subject to the existing input tax recovery and attribution rules.

The GST remission for qualifying funds is extended to qualifying VCCs. Under the GST remission, non-GST registered qualifying non-umbrella VCCs and sub-funds of umbrella VCCs will be able to recover GST incurred on expenses based on a fixed recovery rate.

Scope of Stamp Duty

The sub-funds of an umbrella VCC are treated as separate persons for stamp duty purposes and accordingly, stamp duty is levied at the sub-fund level for instruments executed by an umbrella VCC for its sub-funds.