Public Consultation on Proposed Legislative Amendments for the Corporate Income Tax Treatment of Variable Capital Companies (VCCs)

INTRODUCTION

1. The Ministry of Finance is seeking public feedback on the proposed amendments to the Income Tax Act ("ITA"), which will be amended via the Variable Capital Companies (Miscellaneous Amendments) Bill 2019. The consultation period is from 6 to 21 March 2019.

2. We invite you to comment on the drafting of legislative amendments which will give effect to the proposed tax policy changes. Your views on the drafting will help us improve the clarity of the legislative amendments.

BACKGROUND

3. The Variable Capital Companies Act 2018 (“VCC Act”) was passed by Parliament on 1 October 2018. The VCC Act provides for the incorporation and operation of a new corporate structure for investment funds, and is expected to come into operation in the second half of 2019. The VCC structure will complement and expand the existing suite of fund structures in Singapore. The introduction of VCCs strengthens Singapore’s position as a full-service international fund management centre, and provides opportunities to fund managers and fund servicing professionals such as fund administrators, lawyers, and accountants.

4. As stated during the second reading of the Variable Capital Companies Bill in Parliament on 1 October 2018, the tax framework for VCCs is to be separately set out via legislative amendments to the relevant tax legislation.

PROPOSED AMENDMENTS

5. 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. The legislative amendments are expected to come into effect in the second half of 2019.

6. Salient aspects of the proposed legislative amendments for consultation are as follows:

7. The summary table provides a brief description of the tax changes and explains the amendments to the ITA in detail.

8. The public consultation pertaining to the VCC tax treatments which will be effected by proposed amendments to the Goods and Services Tax Act and the Stamp Duties Act was launched on 14 February 2019 and ended on 1 March 2019.

GUIDELINES

9. We appreciate your understanding to ensure that the consultation is productive and focused. Respondents are requested to observe these guidelines:

10. These draft legislative amendments are released only for the purpose of consultation and should therefore not be used for individuals’ or business decisions as it does not represent the final legislation. All comments received during the consultation will be reviewed. If accepted, comments will be incorporated into the Variable Capital Companies (Miscellaneous Amendments) Bill 2019 for introduction in Parliament.

PERIOD OF CONSULTATION

11. The public consultation is from 6 to 21 March 2019. Any comment received after 21 March 2019 will not be considered.

FEEDBACK CHANNEL

12. We encourage all interested parties to submit your comments, using the prescribed template, through:

SUMMARY OF RESPONSE

13. We will publish a summary of comments received on the Ministry of Finance’s website, together with our responses, by May 2019. The identities of respondents will not be disclosed in the summary.

DOCUMENTS TO DOWNLOAD

14. For reference, here is the link to download the relevant documents for this public consultation.