Charting Tax, Trust Law Changes In Singapore

Dawn Quek and Enoch Wan 9 May 2018


This article by legal experts runs through a series of recent legislative, legal and related changes to tax, trusts and companies in Singapore.

Baker McKenzie, the international law firm, shares insights about latest developments in and around cross-border matters affecting Singapore, such as concerning automatic exchange of information agreements. With so many changes affecting IFCs such as Singapore, this publication is particularly pleased to share such expert views with readers. Nevertheless, this news service does not necessarily endorse all views of outside contributors and invites readers to respond if they have questions, criticisms or further points. They can email

The authors of this article are Dawn Quek, principal and Enoch Wan, senior associate at Baker McKenzie Wong & Leow. This is a member firm of Baker McKenzie in Singapore.

About the authors:

Dawn Quek is the head of the wealth management practice at Baker McKenzie Wong & Leow in Singapore. She is also the Asia Pacific representative on the firm's Global Wealth Management Steering Committee. Her practice includes assisting ultra-high net worth families on their tax, trust and estate planning issues on a cross-border basis. She also advises the financial institutions serving such families on issues and regulations that affect their business. Enoch Wan is a senior associate and his practice focuses on commercial agreements and contracts, tax controversy and litigation, wealth management, VAT & indirect tax.

1, Activation of new Automatic Exchange of Financial Account Information (AEOI) relationships with China and Malaysia

 Automatic exchange of information based on the Common Reporting Standards ("CRS") refer to the regular exchange of financial account information between jurisdictions for tax purposes.

Under domestic law, a financial institution is required to conduct due diligence on all financial accounts it maintains and determine the tax residence(s) of its account holder. The financial institution must then report to the IRAS the particulars and account information of the account holder, if the account holder or the controlling person of the account holder are tax residents of jurisdictions that Singapore has an agreement with. This reporting is done on an annual basis.

As of 9 April 2018, China and Malaysia have been added to the list of Reportable Jurisdictions of Singapore for CRS. For these two jurisdictions, reporting must be carried out by 31 August 2018, in relation to the reporting year 2017.

2, Enhancement of the Enhanced-Tier Fund scheme under Section 13X of the Singapore Income Tax Act (ITA)

Section 13X of the ITA provides for a tax exemption on specified income from designated investments which is derived by an approved person arising from funds managed by a fund manager in Singapore. An approved person was previously limited to a Company, Trust, and Limited Partnership.

The scheme has now been extended to all fund vehicles irrespective of their form, so long as all the other qualifying conditions under section 13X are met.

The potential for alternative vehicles such as Ireland's Collective Asset-Management Vehicle and Luxembourg's Reserved Alternative Investment Fund to qualify for the scheme will increase the options available for the fund management industry, as well as for family offices and the private wealth industry in Singapore.

3, Introduction of a tax framework for Singapore Variable Capital Companies (S-VACCs)

The S-VACC is a proposed new structure for investment funds, with the goal of improving Singapore's competitiveness as a domicile for global investment funds. The Monetary Authority of Singapore (MAS) had recently concluded its public consultation for it in April 2017. As at the time of writing, the MAS has not yet issued any further guidance or commentary on the proposed S-VACC framework.

Generally, the S-VACC would be a company registered under the existing company incorporation system and supervised by the MAS. The SVACC is designed to be a flexible vehicle to cater for collective investment schemes. Among other features, S-VACCs can have cellular sub-funds, which allow for segregation of assets and liabilities. Such sub-funds will not have separate legal personality, and will instead be registered with the Accounting and Corporate Regulatory Authority (ACRA), as part of the umbrella S-VACC.

Generally, the new structure allows the S-VACC to freely redeem shares and pay dividends using its capital. Investors will be able to freely invest in and exit out of the S-VACC. This variable capital structure allows the S-VACC to better fulfill the functions required of an investment fund, as compared the fixed capital of conventional Singapore companies.

To complement the S-VACC regulatory framework, a tax framework for S-VACCs will be introduced. The details are as follows:

(a)          A S-VACC will be treated as a company and a single entity for tax purposes;

(b)          Tax exemptions under Section 13R and 13X of the Income Tax Act ("ITA") will be extended to S-VACCs;

(c)           Approved fund managers managing an incentivised S-VACC can enjoy the 10% concessionary tax rate under the Financial Sector Incentive - Fund Managers scheme; and

(d)          The GST remission for funds will be extended to S-VACCs.

The introduction of a tax framework for S-VACCs is welcome. Given that the intention is to encourage investment funds to be set up in Singapore, the extension of the tax exemption schemes under Sections 13R and 13X of the ITA respectively to S-VACCs is critical to support this drive to enhance Singapore's attractiveness as a jurisdiction for investment funds.

The proposed tax framework for S-VACCs aligns the tax treatment for S-VACCs with that of other vehicles that are currently commonly used for investment funds in Singapore. This makes the S-VACC a genuinely viable fund vehicle from both a corporate and tax perspective, and will do much to attract fund managers to set up in Singapore.

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