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Variable Capital Companies (VCCs)

The Variable Capital Company (VCC) is touted as a « game-changer » for Singapore’s fund industry, as it pits itself against those of other well-known international fund domiciles. Just as the Undertakings for Collective Investments in Transferable Securities (UCITS) transformed the investment fund landscape in Europe, this new corporate structure (which can be likened to a SICAV) introduced on 14 January 2020 will likely raise Singapore’s profile on the global arena.


Constituted under the “VCC Act”, administered by Accounting and Corporate Regulatory Authority (ACRA), while coming under the purview of MAS, this new corporate entity allows great flexibility.


It can be used as vehicles for both open-ended and close-ended strategies across traditional and alternative strategies, thus making it applicable for venture capital, private equity, mutual funds and hedge funds alike.

Assets and liabilities of the investment fund is measured at fair value, which equates to its net asset value (NAV), thereby providing flexibility in distribution which can be made out of both capital and/or income.

It bypasses the need for shareholders’ approval and to conduct a solvency test prior to the repayment of capital, which had been the case with corporates, thus lowering administrative costs, as well as enhancing the efficiency of the structure.

No obligation for a VCC to make its constitution, financial statements and shareholder lists publicly available, thus preserving confidentiality.

It is a body corporate for investment funds only, as opposed to being a unit trust without legal personality. There is flexibility in the investment objectives in its constitution, but it cannot be changed once approved (other than in certain situations and subjected to regulatory approval).

Can have a single shareholder, which can be utilised in master-feeder structures or a single-family office where it’s managed by a qualified fund manager.

The VCC can be set up as a stand- alone entity or as an umbrella structure with multiple sub-funds serving as a pooling and investing vehicle. Provisions stipulate that underlying assets and liabilities are ring-fenced such that cross-contagion risk may be mitigated.

Umbrella Structure

  • Each umbrella VCC and its sub-funds are considered a single entity, therefore they can share the same directors and service providers, thus resulting in significant cost savings.
  • To claim the tax incentives under the 13R and 13X schemes, previously each fund would have had to fulfil the minimum AUM of SGD50mio at point of application, and annual local business spend requirement of $200,000, but provisions for the VCC stipulate that the quantitative conditions will now apply to the umbrella VCC as a whole, instead of each sub-fund.
  • Under the Singapore Registered Fund scheme (13R), there would be a financial penalty on a Singapore non-individual investor who owns more than 30% (typically) of the approved fund. However, as this test is applied on the VCC level instead of on the subfund level, the investor is now more likely to be able to have a holding exceeding the prescribed percentage on the sub-fund level while still below the prescribed percentage on the umbrella fund level.
  • With respect to the 13R and 13X scheme, the investment objective must be satisfied at the level of the umbrella VCC. Therefore, any breach by a sub-fund would adversely impact others under the umbrella. As such, it is of paramount importance to work with a fund manager with stringent risk controls to ensure such a scenario would not materialize.
  • To ensure a clear set of true and fair financial statements, separate accounting and records need to be maintained for each sub-fund so accounting costs are not economised. Further, investors of a sub-fund under an umbrella structure will have access to the financial statements of other sub-funds. All sub-funds are required to have the same accounting period and international standards as the umbrella structure, which allows for greater flexibility beyond just Singapore FRS.

There are generally two ways of setting up a VCC, either by incorporating a Singapore company via the Company Registrar or through inward re-domiciliation of a foreign fund. The latter can be easily done to tap into Asian markets without losing its identity and legacy, subjected to the conditions that the foreign entity must be set up as an investment fund, and that the foreign jurisdiction allows outward re-domiciliation.


In response to the EU’s blacklisting of certain jurisdictions for not cooperating with economic substance requirements, Singapore seeks to combat this by requiring that VCCs engage local service providers to maintain substance in the structure.

Required Service Providers of a VCC

As VCCs are Singapore tax residents, they can apply for a certificate of residence from the Inland Revenue of Singapore (IRS), which essentia lly allows them to claim benefits under Singapore’s extensive network of Avoidance of Double Taxation Agreements (DTAs) with more than 80 countries1.


There is an emerging trend to consolidate multi-jurisdiction fund structures towards fewer or a single location, motivated by greater administrative convenience and operational efficiency, as well as reducing duplicated regulatory requirements imposed separately on the fund and the fund manager. As a form of comparison, please find the most pertinent specifications of some major jurisdictions:

Singapore Ireland Luxembourg Cayman Islands
Judicial System
Common law
Common law
Civil law
Common law
Resident Directors?
Location of Fund Manager
EU, or approved in equivalent non-EU countries
AIFM: EU, but portfolio management can be delegated to a regulated entity anywhere

Non-AIFM: any location but delegated portfolio management to a regulated entity
Not required
No. of tax treaties
Can the fund access the tea treaties
Depends on the country
Tax returns to be filled
Yes, with certain conditions

Family offices can utilise VCCs as a wealth management vehicle, as its shareholders registry is not made public, it would offer privacy to the family members. Secondly there is great flexibility in structuring with VCCs, by utilising a master-feeder structure, where both entities are set up as VCCs, the feeder fund can then have multiple sub-funds with different asset allocations customised to various risk profiles and individual circumstances. For example, there may be sub-funds set up for different branches of the families, or to separate US and non-US investors where the former might want to have a “check-the-box” elections as a “pass-through entity” for US federal tax purposes. Further, the umbrella VCC can still apply for the 13R and13X tax exemption scheme under the Income Tax Act, where it’s possible to effectively eliminate almost all Singapore income tax, subjected to meeting certain conditions. It is also a very appealing vehicle for large families with multiple stakeholders to pool resources for legacy planning purposes.


To encourage the development of VCCs, the Singapore government has announced that it will be co-funding up to 70% of qualifying launch expenses (cap of SGD150k and 3 VCCs per fund manager), until 14th January 2023. The costs can be included in the annual business expenditure requirement of SGD200,000 for the purpose of claiming 13R and 13X exemption. Since its introduction just five months ago, the fund industry has embraced this development, with 100 VCCs launched, as of 7 August 2020.


The new VCC framework will transform the investment landscape as Singapore establishes itself as a leading fund domiciliation hub; the generous VCC grant scheme and supportive tax incentive schemes will further enhance Singapore’s attractiveness as a destination for global wealth management.

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