New VCC Tax Rules from 2025: Lifetime Exemption, Greater Flexibility
- vccweb8
- Jul 15
- 2 min read
Updated: Jul 17
Effective 1 January 2025, the tax incentive conditions under Sections 13O and 13U of the Income Tax Act 1947 have been updated. These enhancements aim to reinforce Singapore’s position as a leading fund management hub.
Why This Matters for VCC Fund Managers
Singapore’s fund tax incentive schemes aim to attract fund management activities by offering:
Tax exemptions on Specified Income (SI) derived from designated investments (DI).
Withholding Tax (WHT) exemption on interest and qualifying payments to non-residents.
Goods and Services Tax (GST) remission on fund-related expenses.
Among the four schemes, Sections 13O and 13U are applicable to VCCs.
Overview of Incentive Schemes Available to VCCs
Section | Scheme Name | VCC Applicability |
|---|---|---|
13O | Tax Exemption Scheme for Resident Funds | VCCs managed by Singapore-based fund managers |
13U | Enhanced-Tier Fund Tax Investment Scheme | VCCs with ≥ S$50M AUM and global investor base |
Key Requirements for VCCs (Awards from 1 Jan 2025)
Transition Rules for Existing VCCs
VCCs with awards granted before 1 January 2025 may continue under current conditions until FY ending 2026.
From FY 2027 (YA 2028), they must comply with the updated AUM, LBS, and IPs thresholds.
Strategic Enhancements
Lifetime Tax Exemption: Approved 13O/13U funds enjoy full tax exemption for their lifespan, as long as conditions are met each year.
Closed-end Fund Option: Private Equity/Venture Capital funds can waive AUM after year 5 and LBS after year 10, aligning with investment horizons.
Flexible Strategy Changes: No MAS approval needed, just notify MAS to change investment strategies.
Committed Capital Support: Funds operating on a committed capital model can use committed capital to meet AUM thresholds, supporting early-stage fundraising and sustainable growth.
Substance Requirements: Local hiring and spending promote Singapore's reputation as a fund management hub.
Recommended Actions for VCC Managers
New VCC Funds (From 2025) | Existing VCC Funds (Before 2025) |
|---|---|
Start with the Right Size: Plan to meet AUM requirement from day one – S$5M (13O) or S$50M (13U). | Know Your Award Date: Check if your fund qualifies for transition rules up to FY2026. |
Choose the Right Structure: Consider closed-end or committed capital options to ease AUM and spend obligations later. | Get Ready for FY2027: You must meet the new AUM, LBS, and IPs requirements from FY2027 (YA 2028). |
Set Up Your Operations in Singapore: Appoint a licensed Singapore-based fund manager and admin. Put in place tracking for DI, headcount, and local spend. | Update Your Compliance Process: Make sure your SOPs and reporting track the new requirements accurately. |
How We Can Help
We support VCC Managers with:
Gap analysis and compliance planning.
Application support for S13O and S13U schemes.
Ongoing compliance tracking and report.
Contact us at vcchub@crowe.sg to schedule a review and safeguard your tax exemption benefits.
