Page 11 - Budget-2018-Highlights-en-flip

TAX INCENTIVES
New Tax Framework for Singapore Variable
Capital Companies
Current
Funds structured as companies1, as well as trusts2
and limited partnerships 3 can qualify for tax
exemption under Sections 13CA, 13R and 13X of the
Income Tax Act (“ITA”) and these incentivised funds
are given GST remission, which allows them to claim
GST at a fixed recovery rate.
Fund managers approved under the Financial Sector
Incentive - Fund Management (“FSI-FM”) scheme
can qualify for 10% concessionary tax rate on the
income derived from managing an incentivised fund.
MAS is studying the regulatory framework for
Singapore Variable Capital Companies (“S-VACCs”)
to further develop and strengthen Singapore’s
position as a hub for both fund management and
fund domiciliation. An S-VACC is a new structure
designed for collective investment schemes4, and
will accommodate a variety of traditional and
alternative asset classes and investment strategies.
Proposed changes
A tax framework for S-VACC will be introduced to
complement the S-VACC regulatory framework:
 An S-VACC will be treated as a company and a
single entity for tax purposes5;
 Tax exemption under Sections 13R and 13X of
the ITA will be extended to S-VACCs;
 10% concessionary tax rate under the FSI-FM
scheme will be extended to approved fund
managers managing an incentivised S-VACC;
and
1 Under Sections 13CA, 13R and 13X of the ITA.
2 Under Sections 13CA and 13X of the ITA.
3 Under Section 13X of the ITA.
4 As defined under Section 2(1) of the Securities and Futures Act.
5 For ease of compliance, only one set of tax return is required to
be filed with IRAS.
 The existing GST remission for funds will be
extended to incentivised S-VACCs.
The conditions under the existing schemes
mentioned above remain unchanged.
MAS will release further details of the tax
framework for S-VACCs by October 2018.
Effective date
The changes will take effect on or after the
effective date of the S-VACC regulatory
framework.
Comments
 To further develop Singapore as a centre for
both fund management activities and
investment fund domiciliation, MAS proposes to
set up a legislative framework for a new
corporate structure that is tailored for collective
investment schemes. MAS also intends to allow
the segregation of assets and liabilities of sub-
funds established under a single legal entity.
 Some key features of the proposed S-VACC
structure include:
 It provides collective investment schemes
with the flexibility to vary their capital and
redeem shares whenever investors
exercise their redemption rights. This
contrasts with the restrictions under the
Companies Act on the return of capital to
shareholders.
BUDGET 2018 HIGHLIGHTS | 9