Summary of responses to public consultation on proposed legislative amendments to introduce the tax framework for Variable Capital Companies
The Ministry of Finance invited the public to provide feedback on the proposed changes to the Goods and Services Tax Act (GSTA), Income Tax Act (ITA) and Stamp Duties Act (SDA) in February and March this year for the purpose of introducing the tax framework for Variable Capital Companies (VCCs).
2. The proposed tax treatment, formulated in consultation with the industry, recognises the unique characteristics of VCCs, which combine the advantage of a single legal entity at the umbrella VCC fund level, with segregation of assets and liabilities at the sub-fund level. Salient aspects of the proposed tax treatment are as follows:
Corporate Income Tax
- An umbrella VCC only needs to file a single Corporate Income Tax return to the Inland Revenue Authority of Singapore, regardless of the number of its sub-funds.
- Tax incentives under sections 13R and 13X of the Income Tax Act will be extended to VCCs. These tax incentives will be granted at the umbrella VCC level, not the sub-fund level.
- Where applicable, an umbrella VCC will enjoy start-up or partial tax exemption which will be applied once at the umbrella level, regardless of the number of sub-funds the umbrella VCC may have. Subject to conditions, a VCC will enjoy the start-up tax exemption for its first three years of assessment (YAs). In the case of an umbrella VCC, the first three YAs are determined with reference to date of incorporation of the VCC and not the date of registration of its sub-funds.
- Deductions and allowances for umbrella VCCs will be applied at the sub-fund level for determination of the sub-fund’s chargeable or exempt income.
Goods and Services Tax
Goods and Services Tax (GST) will be applied at the sub-fund level - i.e. if liable, each sub-fund is required to separately register, charge, account for and file GST returns. This is because each sub-fund makes independent sale and purchase decisions based on its respective investment mandate.
Stamp Duty treatment will be applied at the sub-fund level in view of the segregation of assets and liabilities of sub-funds within an umbrella VCC.
3. Of the 39 suggestions received, 13 were accepted and revisions were made to the draft text of the Bill. The remaining suggestions were not accepted, for various reasons such as being inconsistent with the legislative drafting conventions or with the policy objectives of the proposed legislative changes. Responses to common feedback are highlighted in Annex A.
4. The proposed legislative changes will be incorporated into the Variable Capital Companies (Miscellaneous Amendments) Bill 2019, and if passed by the Parliament, are expected to come into effect in the last quarter of 2019.
5. MOF would like to thank all individuals and organisations who had taken the time and effort to provide their inputs.
Ministry of Finance
5 August 2019
 Please refer to the press release issued on 14 February 2019 for the public consultation documents on the proposed changes to the GSTA and SDA, and the subsequent press release issued on 6 March 2019 for the public consultation documents on the proposed changes to the ITA.