The introduction of the variable capital company fund structure has been a game-changer for Singapore, adding to its already enviable reputation as a business hotspot.
In 2020, Singapore introduced the variable capital company (VCC), a new vehicle for investment funds. By the end of 2022, nearly 800 funds were incorporated under the structure.[1] The VCC positions Singapore as a global funds domicile and a gateway to Asia for European and U.S. managers. Its flexibility and wide application make it a game-changer for the city state.
And it has only added to Singapore’s reputation as a highly business- and investment-friendly location. In our Doing Business Internationally: Singapore webinar, Agnes Chen, regional managing director for APAC, and Raj Keloth, senior director for Singapore, discussed the city-state’s enduring appeal for overseas investors.
Business in Singapore: A key international hub
Singapore has long been seen as an attractive location for international business. The World Bank consistently ranks the city as one of the world’s most business-friendly locations.[2] As we heard in the webinar, it has a highly skilled, diverse, and multilingual workforce, with English the common language for business. It’s strategically located in the heart of Southeast Asia, and operates the world’s second busiest container port.[3]
Singapore’s financial services sector employs around 200,000 people and accounts for more than 10% of the country’s GDP.[4] It’s the only Asian country with an AAA rating from every major credit agency.[5] Its appeal as an international fund domicile is a more recent phenomenon. Today, around 68% of the assets under management (AUM) invested in the APAC region originate in Singapore.[6]
The secrets to Singapore’s success: The Singapore Employment Pass, attractive tax rates, and more
Behind these figures is a highly supportive business environment and a government that’s keen to promote the city-state’s business-friendly credentials. Singapore ranks second in the world for the ease of starting a business.[7]
When companies set up in the city, they find beneficial corporate and personal tax regimes. The corporate tax rate is a competitive 17% for resident companies, and Singapore levies no tax on dividends. It offers a number of attractive tax exemptions for new businesses, and companies also benefit from an extensive network of double taxation treaties.
Part of the secret of Singapore’s success is its ability to attract overseas professionals. More than 890 registered and licensed asset managers operate in Singapore,[8] creating the need for a continual flow of fresh talent into the sector.
Singapore operates an Employment Pass system that prioritizes attracting qualified executives and managers from overseas. Even the S Pass, for mid-level foreign employees, requires earnings of at least S$3,000 a month. Overseas professionals are attracted by the opportunities available in Singapore, a high standard of living, and generous income tax allowances.
Doing business in Singapore: A fund-friendly jurisdiction
A number of entities are available for those looking to do business in Singapore, from sole proprietorships and partnerships to various company structures, including companies limited by shares. The representative office entity, meanwhile, is specifically designed for businesses that want to explore the viability of Singapore as a regional base before committing to permanent incorporation.
Common fund structures include limited partnerships (LPs), which will be familiar to most foreign fund managers, and the VCC. Singaporean LPs share features, such as tax transparency and contractual flexibility, with overseas equivalents.
The VCC is a highly flexible vehicle that offers confidentiality alongside tax efficiency for overseas investors. Tax benefits arise from access to both tax treaties and specific Monetary Authority of Singapore incentives. The VCC serves both open- and closed-end funds and can be established as a standalone structure or as an umbrella for a number of sub-funds. Its wide application and significant tax and cost advantages have made it hugely popular in a short space of time.
Local knowledge is key for Singapore funds
Singapore has worked hard to make itself an international business center, but navigating local labor and governance laws can still be challenging for newcomers. In addition, accessing tax incentives is easier with local expertise on your team.
CSC provides a full end-to-end administration service for funds and businesses in Singapore. We help overseas investors make the most of one of the world’s best business locations.
Why CSC?
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Missed the webinar? Watch it on-demand and register for the full series here.