Variable Capital Company

A VCC is a unique corporate structure used to set up investment funds for families, investors or investment managers. As a fund manager licensed by the MAS in Singapore, Aura Group is recognised as an eligible fund manager for VCC funds. 

VCC opportunities in Singapore for fund managers and family offices 

Singapore has become one of the world’s leading locations for investment fund vehicles due to the relative ease of doing business, clear regulatory environment and attractive tax incentives for investment funds and fund managers.

In 2020, Singapore introduced a new corporate structure for investment funds under the Variable Capital Companies Act. Coined Variable Capital Company (VCC) funds, they’re growing in popularity thanks to their flexibility, and tax efficiencies.

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Understanding the VCC structure 

A VCC is a unique corporate structure that’s used to set up investment funds for families or investors. The funds can be used for a wide range of investment strategies, including mutual funds, hedge funds, private equity and real estate funds. A VCC must appoint an asset manager that’s licensed and/or registered by the Monetary Authority of Singapore (MAS) to manage its assets.

A VCC can be set up as a standalone entity or an umbrella entity with two or more sub-funds under it. The standalone structure is set up as a single fund, whereas the umbrella structure allows for multiple sub-funds under the umbrella structure, each with their own investments. This makes the umbrella/sub-fund structure an ideal investment vehicle for family offices in Singapore, as well as investment managers looking to create a presence in South-East Asia.

Aura Group Singapore is a licensed fund manager with an existing umbrella VCC. This means we can create multiple sub-funds that are segregated from our other VCC sub-funds. The sub-fund mandate can be tailored to each investor’s requirements for investment management purposes. Aura Group Singapore can act as the fund manager for the VCC sub-fund and will work with the asset owners to implement their preferred investment strategy.  

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VCCs for family offices 

For families wanting to use the VCC structure, Aura can help establish a family office that’s highly customised to each family member’s needs. The flexibility of the structure means the family office can create separate sub-funds for each family member, either as a stand-alone umbrella-type VCC or using an existing umbrella VCC. Because assets and liabilities can be easily segregated for individual family members, a VCC is a great way to accommodate large families or multiple generations.

Family members can customise their investments by participating in the creation of the Investment Mandate and can incorporate factors such as tax efficiency, philanthropy and asset management into their Family Office vehicle. A VCC must have a least one director based in Singapore. The auditor and company secretary must also be based in Singapore. Aura Group’s umbrella VCC is structured this way.

VCCs for fund managers that want to operate in Singapore

Creating a standalone VCC, or a sub-fund under Aura Group’s existing VCC structure, provides an entry point to the Singapore market for fund managers who are not currently licensed to operate in Singapore. It enables asset managers to start the process of offering their funds management solutions to accredited or institutional investors in Singapore, by partnering with us as a licensed entity.

Using the Aura Group VCC creates a taxable presence in Singapore for the fund so any investment gains may be considered Singapore-sourced and therefore any tax liabilities may be eliminated under Singapore’s tax incentive schemes. All funds that qualify at 31 December 2024 may enjoy tax exemption for the life of the fund.

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Tax-effective investing

 
A VCC can provide investors with the benefit of access to Singapore's tax incentive schemes, such as the Enhanced-Tier Fund and Singapore Resident Fund Schemes. Assets aren't subject to capital gains or income tax, subject to qualifications. What's more, dividends paid to investors in Singapore are tax-free according to Singapore tax law, assuming the investor is tax resident in Singapore. If the investor is tax resident elsewhere, the dividends may be subject to tax in that jurisdiction.
 
Aura can help set up a VCC to meet these requirements, or our existing umbrella VCC already qualifies for both Fund based tax incentive schemes.
 
  • Singapore Resident Fund Scheme, 130

  • Enhanced-Tier Fund Scheme, 13U

Singapore Resident Fund Scheme, 130

The Singapore Resident Fund Scheme is a tax incentive designed to encourage fund managers to base their investment vehicles in Singapore. It offers similar benefits to funds located in for instance, the Cayman Islands, providing tax exemption for specified investment income from designated investments.

Aura Group currently has multiple investment products that would be suitable for achieving investment objectives under this structure. The key requirements for the Singapore Resident Fund Scheme 13O for licensed funds management companies, or companies exempt from holding a CMS license are: 

  • Funds must be managed by a Singapore based fund manager, licensed by MAS
  • The fund must be tax resident in Singapore
  • Annual expenses must be SGD$200,000 or more
  • The fund must be administered by a Singapore based administrator
  • MAS must approve the application for the tax exemption

Aura’s umbrella VCC fund already has tax exempt status.

Single Family Offices wanting to make use of the 13O tax exemption, must comply with the following requirements: 

  • Minimum SGD20m in “Designated Investments” at the point of application and throughout the incentive period
  • Employs at least two people, one of whom is not a family member
  • Qualified investment professionals must be Singapore tax residents and have relevant work experience and qualifications
  • Investing lower of $10 million or 10% of AUM in MAS approved investments
  • The Fund must have a private banking account with an MAS licensed bank
  • The tax exemption application must be approved by MAS
  • Family office/fund must be incorporated and be a tax resident in Singapore
  • Requirement to contribute a percentage of AUM to charity, depending on size of Family Office

These requirements negate the need for a Family Office to hold a CMS licence to manage their assets and provide qualification for the tax incentives. For some Family Offices these requirements can be difficult to meet, and it may be easier for the Family Office to utilise a VCC structure through an existing licensed fund manager. Aura Group can provide this service.    

 

INDICATIVE 13O STRUCTURE FOR FAMILY OFFICES

 

INDICATIVE 13O STRUCTURE FOR FAMILY OFFICES

 

Enhanced-Tier Fund Scheme, 13U 

The Enhanced-Tier Fund Scheme is similar to the Singapore Resident Fund Scheme: however, it doesn’t require the family office or fund to be a tax resident of Singapore and it has a higher assets under management requirement. It offers the same tax exemption benefits for specified investment income from designated investments. Setting up a 13U fund as a sub-fund under the VCC structure (similar to the Cayman SPC system) can offer segregation of portfolios and offshore benefits while still enjoying the Singapore tax treaty system.  These are the key requirements: 

  • Minimum assets under management of SGD50m at the point of application
  • At least SGD500k local expenses incurred by the fund per year
  • Has at least three investment professionals and uses a Singapore-based fund administrator (Aura's VCC already fulfils this requirement)
  • Must be approved by MAS
  • Family office/fund does not need to be incorporated or be a tax resident in Singapore
  • If it is a family office wanting to make use of the 13U tax exemption, the family office must have approval from the MAS
  • If the family office chooses to use a licensed fund manager to manage the funds, they can avoid applying to MAS for approval to be considered as a Single Family Office and also for the tax exemption.

Effective July 2023, there are additional rules for Single Family Offices to qualify for SFO status as well as to qualify for the tax exemptions. These relate to the type of investments that must be in the portfolio as well as to requiring donations to local charities. 

 

INDICATIVE 13U STRUCTURE WITH TRUST

 

Indicative 130 Structure for Family Office-1 

How Aura Group can help 

Aura Group is a Singapore-licensed fund manager, which makes us eligible to set up and administer funds for family offices and fund managers in Singapore. We can use our existing umbrella VCC to create multiple sub-funds that are segregated from our other VCC sub-funds.   Our existing umbrella VCC already satisfies many of the key requirements under the various tax exemption schemes. This removes the burden for SFOs or Asset Managers of having to apply to MAS for recognition, licensing or tax incentives schemes, making it easier for our clients to focus on their investment goals.  Acting as the fund manager for the VCC sub-fund, we will work with clients to: 

  • Draft legal documentation for the fund
  • Ensure compliance and legal requirements are met
  • Provide investor onboarding services
  • Manage the capital commitment process or fund investment process
  • Provide fund administration services through our trusted partners
  • Manage tax reporting to MAS and ensure compliance with MAS requirements
  • Act as the licensed/regulated fund manager
  • Provide reporting to clients according to your preferred timetable, in line with MAS requirements

We have strong established relationships with administration providers, lawyers, accountants, auditors and banks that we can leverage to offer a smooth process to establish either a standalone VCC or create a sub-fund under our existing VCC structure. If you would like more information about how Aura Group can help you set up and administer a VCC as either a family office or fund manager, please click on the link below and we will be in touch.  

This information is correct as at 28 June 2024.

Meet the Team

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Calvin Ng

Managing Director, Aura Group


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Tong Hoe Sng

Director, Head of Private Wealth

 

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Andrew Nai

Director, Private Equity

 

 

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Darryl Tom

Managing Director and Head of Family Office

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Nicholas Teo

Senior Financial Advisor

 

 

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