Against the backdrop of base erosion and profit shifting (BEPS) and the introduction of legislations in respect of economic substance test in traditional offshore tax haven jurisdiction e.g. the British Virgin Islands (“BVI”) and the the Cayman Islands, fund managers and ultra high net-worth investors would need to consider the long term compliance stability of using onshore fund structures.

More jurisdictions are also widening their definition of permanent establishment and source-based rules to bring within their purview additional revenue from cross-border interactions. As such, domiciling funds in a tax haven jurisdiction that does not have any tax treaty increases the risk of attribution of profit to every jurisdiction where activities are undertaken on behalf of the fund.

Further to the above events, with the launch of the VCC structure, there has been much interest from global investors and fund managers to in order to leverage on Singapore’s reputational advantages as an onshore fund domicile, robust financial services industry and Double Tax Agreements (“DTA”) network.

The key features of a VCC are the ability to offer a flexible capital structure, efficient upstream of cash, access to Singapore’s tax treaty network, and the allowance for the creation of sub-funds within an umbrella structure. The umbrella structure allows ringfencing of the assets, liabilities and risks associated with the assets held by each sub-fund and its obligations with respect to investors within the sub-fund. The VCC framework facilitates the domiciliation of investment funds in Singapore across open-ended and close-ended funds, catering to the needs of both traditional and alternative fund managers. Besides the incorporation of new investment funds, the VCC framework also allows fund managers to redomicile existing overseas investment funds with structures comparable to that of a VCC, by transferring their registrations to Singapore as VCCs.