The Variable Capital Company (“VCC”) was gazetted on 20 January 2020.  With so much hype at the moment around the VCC, what are the tax considerations for you as an investor when you buy into a VCC?

The VCC is conceptually a corporate entity of a single or multiple ‘pooled’ funds that is managed by a Singapore fund manager.  In essence, it is a corporate structure with investors as ‘shareholders’ who can buy into and exit their holdings at any one point.  It is an alternative to other existing investment vehicles for the asset management industry. 

A VCC can be set up as a standalone fund or an umbrella fund.  An umbrella fund is a single legal entity with several distinct sub-funds which, in effect, are treated as individual investment funds.  In other words, an umbrella VCC is a Collective Investment Scheme (“CIS”) with its investments assigned to the relevant sub-funds.  A share in an umbrella VCC will be referenced to the share of the sub-fund.  The value of the shares will be proportionate to the Net Asset Value (“NAV”) of the VCC or that of the relevant sub-fund. 

Generally, shares in a VCC have the same characteristics as shares in a company, with a couple of modifications and exceptions, such as: –

• entitlement to assets and liabilities that are legally quarantined within each sub-fund;
• rights to receive dividends out of capital, without the need for distributable profits;
• the ability to exit by way of share redemption, etc.

For the full details, please download the full article.