the asian luxembourg: singapore as a fund location...• tax treatment similar to that of a...

The Asian Luxembourg:

Singapore as a Fund Location1 September 2020

2© 2020 KPMG Services Pte. Ltd. (Registration No: 200003956G), a Singapore incorporated company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

Welcome

Presentation by Preqin The Alternative Assets Landscape in 2020 Outlook & Investor Intentions in 2020

Presentation by KPMG in Singapore Economic Substance Laws Why choose Singapore as a fund location? Typical Fund Structures

Q&A

Today’s Agenda

Anulekha SamantPartnerAsset Management and Real Estate, TaxKPMG in Singapore

Marian RajanathanVP, APAC Investor DataPreqin

Teo Wee HweePartnerHead of Real Estate and Asset Management, TaxKPMG in Singapore

Speakers

Economic Substance Laws



In response to the OECD and EU reports, several jurisdictions have introduced economic substance laws. While each jurisdiction has introduced its own legislation and guidance, the key requirements are broadly similar across jurisdictions (as they are based on the recommendations made by the OECD and the CCG).

Cayman IslandsArea: 264 km2

Population: ~70,000

British Virgin IslandsArea: 153 km2

Population: ~30,000

* Not all-inclusive

BarbadosArea: 439 km2

Population: ~280,000

BermudaArea: 53.2 km2

Population: ~70,000Isle of Man

Area: 572 km2

Population: ~80,000

GuernseyArea: 65 km2

Population: ~60,000

JerseyArea: 118 km2

Population: ~100,000

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Relevant Jurisdictions: Barbados, Bermuda, BVI, Cayman Islands, Guernsey, Isle of Man and Jersey

Relevant Entities:• Locally incorporated companies• Foreign companies registered in

the relevant jurisdictions• Limited partnerships

Exclusions:• Registered as a tax resident in

another jurisdiction• Cayman: Investment Funds• If no income generated from

Relevant Activity (e.g. BVI, Jersey, IOM) in a financial period

• Comply with the law based on each of the activities / business line

• BVI: Investment Funds excluded

• Outsourcing / sharing locally – only those attributable to the entity is considered

• Local resources availability - cost• What is “adequate”

Economic substance:

• Physical premises

• Adequate employees

• Managed and directed (Board)

• Core income generating activities

(CIGA) conducted locally

• Operating expenditure

Relevant Activities:

• Holding company

• Banking business

• Distribution and service center

• Finance and leasing

• Fund management

• Headquarter business

• Insurance business

• Intellectual property (IP) holding

• Shipping business


Why Singapore?



Robust Investment Platform

Accessibility

Tax transparency in today’s global

landscape

Increased transparency across the world

Exchange of information

Bermuda, Cayman and BVI substance requirements

Wide tax treaty network

Fund specific tax and regulatory framework

Establishing substance

Common consideration

Business environment

Investors’ familiarity

Certainty of tax treatment

Political and economic stability

Infrastructure

Competitive costs

Reputation

Flexibility

No thin-cap / Flexible capital structure

No foreign currency control restrictions

Ease of repatriation and exit



Robust Investment Platform

• Regulatory framework • Diverse fund

structures• Hub for asset

managers • Finance and

banking infrastructure

• Transparent regulations / licensing and registration regime

• Business friendly government authorities. MAS working closely with the industry with asset management as a close focus.

• Adaptive laws to consistently encourage the growth of the Industry

• 5-10% potential CIT rates

• Deep talent pool

• Company / LPs / REITs / BTs / VCCs

• Option for both onshore and offshore fund structures

• Ease of set up and maintenance

• Availability of financial grants

• Access to a strong banking sector

• Availability of competent, professional service providers

Singapore’s Fund Management Incentives



Overview of Singapore’s Fund Management Incentives

• Singapore Resident Fund Scheme (Section 13R)

• Enhanced-Tier Fund Tax Incentive Scheme (Section 13X)

• Singapore Venture Capital (VC) Fund Scheme (Section 13H)

Fund

• Financial Sector Incentive – Fund Management (FSI-FM)

• Fund Management Incentive (FMI)

Fund Manager



Overview of Singapore’s Fund Management Incentives

Tax

Exemption on interest, dividend, gains from disposals

10% concessionary tax rate for Singapore fund manager

WHT exemption on interest and interest related payments made to non-residents with no Singapore PE

Substantial GST recovery

Income tax exemption

Recovery of GST

WHT exemption

FSI-FM tax incentive scheme



Section 13R - Singapore Resident Fund (SRF) Scheme

Approved Company

(Singapore)

Fund Manager (Singapore)

Investments

Dividends, interest, gains

=> Tax Exempt

Qualifying Relevant Owner

Non-qualifying Relevant Owner

Financial penalties

apply

Tax @ normal rate (17%) or

10%



Section 13X – Enhanced-Tier Tax Incentive (ETF) Scheme

Approved Person

(Singapore)

Fund Manager (Singapore)Fee

Investments

Tax @ normal rate (17%) or 10%Dividends,

interest, gains => Tax Exempt

Standalone Fund



Section 13H – Singapore Venture Capital (VC) Fund Scheme

Approved Person

(Singapore)

Fund Manager (Singapore)Fee

Investments

Tax @ normal rate (17%) or 5%Dividends,

interest, gains => Tax Exempt

Investment restriction –30% investment in SG

companies



Tax Implication – Fund Manager

• 10% concessionary tax rate (reduced from 17%)

FSI FM scheme – Fund Manager of Section 13X / 13R funds

• Must have minimum AUM of at least SGD250 million

• Must have at least 3 investment professionals (as defined)

• 5% concessionary tax rate (reduced from 17%)

FMI scheme – Fund Manager of Section 13H funds

• Must have minimum AUM of Section 13H funds of at least SGD40 million

• Hires at least one additional investment professional by the end of the FMI award (as defined)

Variable Capital Company



VCC – Overview

What is a VCC?How can it be set up?

What can it be used for?

As a stand-alone or as an umbrella entity with multiple sub-funds

Ring-fencingAssets and liabilities of one sub-fund are segregated from the VCC and other sub-funds of same VCC Traditional and alternative fund strategies

(both open-ended and close-ended)

New legal entity form / structure for investment funds

Singapore Variable Capital Companies (VCC) legislation



VCC – Ring Fencing of Risks

Variable Capital Company

Sub-Fund 1 Sub-Fund 2 Sub-Fund 3

Portfolio A Portfolio B Portfolio C

$$ $$ $$



VCC – Key Tax Features

Stand-alone (single fund) VCC

• Tax treatment similar to that of a Singapore company.

• Benefits of ETF Scheme and SRF Scheme extended to VCC (including WHT exemption on interest and interest related payments)

Umbrella (multiple sub-fund) VCC

• VCC can apply for tax incentives on behalf of its sub funds

• Conditions under the ETF Scheme and SRF Scheme only need to be met by the umbrella VCC (and not to each individual sub-fund)

• If umbrella VCC fails to meet incentive conditions, umbrella VCC (and its sub-funds) will not be able to enjoy tax exemption for the given year.

• Single CIT return will be filed by umbrella VCC regardless of number of sub-funds

Typical Singapore Structures



SG Holding company

SG SPV

SG LP

SG SPVSG SPV

Fund ManagerIMA

CorporateFeeder

US exempt investor

LP Feeder

UStaxable investors

Other investors

Investors

IMA

Typical Structures – Real Estate

Property (Japan)

Property (Korea)

AUT (Australia)

Sub Trust (Australia)

Property (Australia)

TMK/TK(Japan) REF (Korea)



SG Holding company

SG SPV

SG LP

SG SPV

Fund ManagerIMA

Investors

IMA

Indo Co Vietnam Co

Typical Structures – Private Equity

New DTA signed

SG SPV

Thailand Co



SG Holding Company

SG LP

India Borrowing Co

Fund Manager

IMA

VCC1

1Could be set up as a VCC

Investors

IMA

Typical Structures – Credit Fund (India)

AIF(India)

India Borrowing Co

OR



Investments

Investors


VCC

Typical Structures – Hedge Fund

Fund Manager IMA



SG Holding Co

SG LP

Target Co

Fund Manager

IMA

VCC1


Investors

IMA

Typical Structures – Venture Capital



Holding Co

SG / Cayman / Lux LP

Target Co

Fund Manager

IMA

VCC1


Investors

IMA

Investments

Typical structures – Venture Capital

Contacts

Teo Wee HweePartnerHead of Real Estate and Asset Management, TaxKPMG in Singapore

Email: [email protected]

Anulekha SamantPartnerAsset Management and Real Estate, TaxKPMG in Singapore


Marian RajanathanVP, APAC Investor DataPreqin


mailto:[email protected]



Thank You

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

© 2020 KPMG Services Pte. Ltd. (Registration No: 200003956G), a Singapore incorporated company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

The KPMG name and logo are registered trademarks or trademarks of KPMG International.

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