Singapore launched a new corporate structure in January called the Variable Capital Company in its pursuit to become the leading financial centre in the region.
The VCC is designed for traditional and alternative investment funds and was designed specifically to attract the funds of fund managers and family offices registered in low tax jurisdictions like the Cayman Islands.
The VCC has many tax efficient features that mirrors Luxembourg’s Sicav, the Segregated Portfolio Company (SPC) in the Caymans and Hong Kong’s Open-Ended Fund Company (OFC). The VCC is appealing because of Singapore’s reputation of being regulatorily strict. The Singapore Government has offered to offset up to 70% of set up costs (with a cap of S$150k) per company, this is valid until January 2023.
Both Singapore and Japan have ramped up efforts to present themselves as the best alternative to Hong Kong after growing concerns about its status. Funds are preparing contingency plans after a swarm of pro-democracy protests hit the nation last year.
Four multibillion-dollar funds are in the process of registering VCCs and seventy VCCs have already been launched. Bankers and tax advisors anticipate a much larger wave coming this way.
The Monetary Authority of Singapore informed that they expect the VCC to attract large institutional investors thanks to its “corporate variability, segregation of assets and liabilities and its ability to access tax treaty benefits”. They added that VCC fund managers will be regulated by the MAS and will be subject to anti-money laundering and counter terrorism obligations.