Why is Singapore a Good Investment Hub to Start VCC?

Joanna Huang October 31, 20194 mins read

The Government in Singapore has approved the Variable Capital Company (VCC) model in a bid to attract more foreign investors.

The VCC is a unique corporate structure that features benefits such as giving investors access to capital shares, transparency, reasonable tax treatment, and dividend distribution to all stakeholders.

The VCC model will revolutionise the previous corporate business model that has been somewhat restrictive and less attractive to foreign investors.

Singapore aims to become a foremost supporter of the fund management system in Asia, a plan that will have a significant positive impact on the country’s economy.

In this article, I will be writing about the benefits foreign investors can get when they start a VCC in Singapore.

The Variable Capital Company act was passed by the Parliament, and approved by the President of Singapore in October 2018. It is expected that introduction of the VCC model will improve the fund management industry in many ways.

Here are the benefits investors who decide to start a VCC in Singapore can get:

Better taxation policies

Singapore already has reasonably lenient tax laws, with a low corporate taxation structure for local companies and agreements with other countries to exempt its investors from double taxation. 

The taxation policy in Singapore creates a better platform for the VCC model to thrive. The friendly taxation laws will play a major role in convincing fund management companies in Singapore to domicile their funds in the country, instead of operating offshore accounts.

Economic stability in Singapore

The economy in Singapore has gone through an impressive phase in the past years and is stable. It is important that the country supporting VCC and foreign investments has a stable economy. Foreign entrepreneurs can confidently invest and participate in dividends distribution to get significant profits from thriving business sectors. 

Transparency in governance

Singapore has maintained a high level of business ethics to improve government transparency. Foreign investors who seek to establish a VCC in the country will get fair treatment and more opportunities to expand their businesses. 

The transparent system used in governance makes it possible for investors to achieve their expected returns and make long-term plans because they can ascertain the actual investment costs and capital requirements for their businesses.

The VCC model also provides a business investment platform that offers the investors a confidential system.

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Improvement in operational efficiency

Foreign entrepreneurs who have access to capital are constantly searching for the best global regions to invest and explore more opportunities. Singapore has successfully taken a strategic position with the passing of the VCC act. 

The VCC model introduces a level of operational efficiency that can improve the efforts of fund managers to maximise investment opportunities.

With the new model, fund managers can implement individual investment strategies with segregated portfolios. Previously, the fund managers were compelled to create a different legal entity when they needed to create a new investment portfolio, which was quite expensive and challenging. 

Stamp duty treatment applies to each sub-portfolio in VCC. What this means is that an investment involving property or shares can be made using independent portfolios with sub-funds.

Also, investments under segregated portfolios are managed independently. What this means is that investors in one segregated portfolio are not affected if another portfolio under the management of the same VCC suffers a loss.

There are specific VCC bankruptcy regulations that apply to each portfolio independently, if the VCC is being shut down.

The segregated portfolio administrative system under the VCC model are managed and independently secured with smart financial procedures to increase the chances of earning a profit. 

The ease at which fund managers can operate under the new VCC model will increase the chances of getting more profit from multiple investments in Singapore.

Leveraging the benefits of an international fund management center

Singapore is an established international fund management center. It is an advantage for foreign investors to bring their business to Singapore, where the benefits of a full-service fund management system are already available. 

The characteristics of an international fund management operation include tax exemptions, an expansive network of tax treaties with other countries, faster and more effective administrative procedures, independent fund management, and investment flexibility.

The VCC model has created a lucrative option for fund managers in Singapore. Since the news about its introduction was announced there has been significant interest from the local and foreign investment sectors to set up VCCs.

There are prohibitions in the policies guiding the fund management process for VCC that highlight the need to avoid illegal financial dealings such as money laundering or the financing of terrorists.  

The VCC model is also expected to create over 1,000 jobs in Singapore. This is good news; investors can recruit competent employees who have the talent and experience in different business sectors in Singapore. The availability of talented local workers in the country will help companies avoid the expenses of recruiting foreign talents while focusing on business growth. 

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If you are intending to set up VCC here in singapore and keen to explore talents within the industry, feel free to reach out to me for more information. 

 

Joanna Huang - R1659350's picture
Consultant | Finance, Asset Management & Fund Services Recruitment
joannahuang@morganmckinley.com.sg

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