The Variable Capital Companies Act 2018 is expected to come into force in the second half of 2019. The MOF is currently consulting on the GST and stamp duty treatment of sub-funds in a VCC. It is proposed that for these purposes sub-funds will be treated as if they were separate entities in respect of supplies and transactions made.

The Variable Capital Companies Act 2018 was passed by the Singapore Parliament on 1 October 2018. It is not yet in force but is expected to come into force in the second half of 2019. The Ministry of Finance (MOF) is carrying out a consultation on the goods and services tax (GST) and stamp duty treatment of variable capital companies (VCCs), in particular, the treatment of sub-funds within a VCC. A write up on the salient characteristics of a VCC is available here.

The MOF had previously announced its proposed tax treatment of a VCC:

• A VCC will be treated as a company and a single entity for tax purposes. This means that only one set of income tax returns is required to be filed with the Inland Revenue Authority of Singapore. 

• The tax exemptions for the income of a company incorporated and resident in Singapore arising from funds managed by fund manager in Singapore (section 13R of the Income Tax Act) and for the income arising from funds managed by a fund manager in Singapore (section 13X of the Income Tax Act) will be extended to VCCs. 

• The 10% concessionary tax rate under the Financial Sector Incentive – Fund Management scheme will be extended to approved fund managers managing incentivised VCCs. 

• The existing GST remission for funds will be extended to incentivised VCCs.

The current proposal is that liability to stamp duty and GST will be applied on a sub-fund basis:

• With respect to stamp duty, transactions carried out between sub-funds of a single VCC will be liable to stamp duty (if applicable) as if the sub-funds were separate legal entities. A transfer from one sub-fund to another of shares in a private limited company or of immovable property (for example) will therefore be subject to stamp duty. Transfers between the umbrella fund and its sub-funds will be treated the same way. 

• Similarly, the supply of goods and services from one sub-fund to another sub-fund will be treated as a supply of goods and services between two separate entities and GST will apply accordingly. Sub-funds will therefore need to assess their GST registration liability on a separate basis, based on the value of taxable supplies they make.