Variable Capital Company (VCC)
Recently, there is a growing demand for ONSHORE fund structures.
Funds are moving away from traditional OFFSHORE tax haven jurisdictions such as BVI and Cayman Islands, to ONSHORE jurisdictions such as Singapore (VCC Framework) and Hong Kong (Limited Partnership Fund), both of which have been building up their competitive edge in Fund Structures and Asset Management through various tax breaks, tax incentives and vast DTA networks.
We are seeing more VC/PE funds and family offices setting up fund structures in Singapore via Variable Capital Company (VCC). As at 24 Nov 2020, 10 months since the VCC was launched in January 2020, there are already more than 150 VCCs set up.
Why ONSHORE Fund Structure
As an onshore structure which domiciled in Singapore obviously comes with advantages because if the fund manager is located here, investment professionals are on the ground, these lend very well to substance arguments (which are heatedly discussed in offshore structure). From a legal perspective, it simplifies things if you have the VCC and the manager domiciled in Singapore in the same location because then it also means you deal with one set of laws, Singapore laws and one layer of service providers (versus two layers for offshore structure) in the same time zone, the same geography, same location, it’s an enormous amount of savings in time and cost.
VCC Fund Structure
VCC fund structure can be used for open-ended or close-ended fund, standalone VCC or umbrella VCC with sub-fund or multiple sub-funds. VCC needs to be managed by a licensed fund manager in Singapore. Under umbrella VCC with multiple sub-funds, each sub-fund is segregated and the assets and liabilities are ring-fenced i.e. the assets of one sub-fund cannot be used to discharge the liabilities of another. Tax exemptions (Section 13X and 13R) and tax deductions are available to VCC-structured fund to essentially zero-ise the tax.
As VCC is a corporate entity, VCC and its investors are able to benefit from more than 80 tax treaties / DTAs between Singapore and other jurisdictions, which translate to fund's performance and ultimately, investors return.
As a licenced fund manager in Singapore, we are able to set up VCC fund structures with multiple segregated subfunds to meet different needs of investors: Family Offices, HNWIs with different investment objectives.
Capitale Team is happy to chat about how VCC works or how it helps FOs and HNWIs to self-manage, and also grow sizeable alternative investment portfolios with control over the investments.